Inflation Knocks U.K. Cards Retailer Emerging From Covid Slump

(Bloomberg) -- Just as sales are starting to pick up for U.K. greeting card retailer Card Factory Plc, inflation is casting an unwelcome shadow on its earnings prospects.

The shares plunged as much as 14% in early trading on Thursday, the most since May 2021, after the company warned that inflationary headwinds will squeeze profit margins in the fiscal year ending Jan. 31 2023. Its efforts to mitigate the effects of these, including raising prices and cutting costs, won’t be enough to drive earnings to the level it had anticipated, the company said in a trading update.

Like-for-like store sales in the run-up to Christmas returned to levels similar to December 2019, it said. 

While the board is confident the company can deliver year-on-year revenue growth in fiscal 2023, approaching pre-Covid levels, “Ebitda margins are expected to reflect significant inflationary headwinds,” it said. The company expects the increasing cost of freight, investment in headcount and the development of its online platform as well as rising wage and utility costs to add about 30 million pounds ($41 million) to the fiscal 2020 cost base “net of mitigation.”

With inflation accelerating at the fastest pace in more than a decade, one-in-three U.K. consumers say they will cut their household spending in 2022, a KPMG survey showed on Wednesday.

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