Card Factory PLC (LON:CARD) shares slid in mid-morning trading Tuesday as the retailer reported shrinking profits in the first half, the latest high street retailer to come under pressure.
The FTSE 250-gift and card retailer reported that underlying pre-tax profits had fallen 13.9% to £22.7mln over the period despite revenues rising 3.2% to £185.3mln.
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Like-for-like sales for the first half also declined 3.3 percentage points to -0.2% from 3.1% growth previously.
The firm maintained its interim dividend at 2.9p per share and declared a special dividend of 5p, although this was less than the 15p special dividend declared in the previous year.
The company cited lower high street footfall and a weak consumer environment as one of the factors behind its disappointing performance, adding that challenging trading conditions for its Getting personal division had continued with increasing price competition and rising costs of customer acquisition impacting the business.
Despite this, the company said it had opened 25 new stores in the period and was on track to deliver 50 new UK stores by the end of the year, as well as reporting 85% sales growth in its online division.
In its outlook, Card Factory said it did not see the weak consumer environment changing in the short term, adding that it expected underlying earnings (EBITDA) for the year would be between £89mln-£91mln, with the fourth quarter trading period “critical in determining the final result for the year”.
Russ Mould, investment director at AJ Bell, said that Card Factory had a strong enough brand to market higher quality items, however, at the moment it was cutting prices to stay competitive, which “may not be the right thing to do if the profit margin is getting squeezed”.
He added that the reduction in earnings meant the cash flow cover for the dividends was getting thinner, meaning the days of the special dividend “could be numbered”.
Shares were down 3.4% at 179.8p.