Card Factory has reiterated its profit guidance for the current financial year, ahead its final quarter, which it has labelled its ‘golden quarter’.

The greeting cards, gifts and celebrations products retailer reported that in the six months to 31 July, its revenue increased by 5.3% to £260.8m, reflecting the acquisition of Funky Pigeon, while its earnings increased by 2% to £45.1m.

However, its adjusted profit before tax dropped by 3.8% year-on-year to £12.7m following investment in digital and the international businesses to support future growth. Improvement in store profitability was delivered through higher profit margins and the benefits of its ‘Simplify and Scale’ efficiency and productivity programme.

Furthermore, total store sales dropped by 0.7%, reflecting continued pressure on UK consumer sentiment, which has impacted footfall and like-for-like store sales, which fell 2%.

Card Factory said that despite the challenging backdrop, improved store execution, particularly through Spring sale and range change activity, resulting in higher product margin and improved store profitability.

CEO at Card Factory, Darcy Willson-Rymer, stated: "We made further progress in the first half towards building a broader, more diversified celebrations business. Despite continued pressure on the UK consumer, Group revenue increased and profitability remained broadly flat, with improved store profitability and disciplined working capital management delivering strong free cash flow.

"We remain focused on strengthening our store estate and increasing our share of the celebrations market. During the first half, we continued to optimise our stores and space, strengthened our value proposition and rolled out our new party range. In addition, the ongoing development of our partnerships and international businesses are broadening our reach and creating further opportunities for growth, and the integration of Funky Pigeon and delivery of the expected synergies remain on track."

In its outlook, the firm said it recognises the consumer environment remains uncertain and it has been working to ensure that its offer remains “relevant and attractive to consumers”.

It has been encouraged by trading since H1 and heading into the final quarter of the year, known as golden quarter, it has strong plans in place, with “significant product newness, targeted value investment and an increased focus on driving customer traffic”.

As a result, Card Factory remains confident in its adjusted profit before tax expectations, reiterating its guidance of £56.7m, with a range of £54m and £59m.

Following the update, shares in the retailer increased by over 4%.

Investment director at AJ Bell, Russ Mould, concluded: "Card Factory’s latest numbers were greeted warmly by long-suffering shareholders as they showed a crucial improvement in cash flow. They also showed last year’s acquisition of Funky Pigeon is providing some much-needed digital diversification.

"Positive cash generation during a first half which traditionally sees cash go out of the door demonstrates the disciplined approach being adopted by management as did a tangible improvement in margin performance. Card Factory stuck with full-year guidance and gifted investors a healthy increase in the dividend to convey management’s confidence in the outlook. After weak summer footfall put pressure on sales, CEO Darcy Willson-Rymer’s signalling of a return to like-for-like growth in recent weeks provided some reassurance that the picture is improving.

"Whether Card Factory can build on this more stable base will depend heavily on the crucial trading period in the run-up to Christmas."

---