Card Factory has posted a 43.3% decline in profit before tax in its first half results, as the card retailer’s profits slipped to £14.0m in the six months to 31 July.

The company blamed “substantial increases” in wage costs as a result of the national living wage hike in April.

The retail chain, which operates 1,073 stores including 35 stores in Ireland, also cited freight inflation and the phasing of strategic investments.

Card Factory did however post a 5.9% jump in group revenue to £233.8m, which CEO, Darcy Willson-Rymer, said was “further progress against its growth strategy”.

“As we move into the second half of the year and the important Christmas trading period, our expectations for the full year are unchanged and we continue to focus on managing inflationary pressures within the business,” Willson-Rymer added.

“Our strategic growth ambitions are underpinned by a robust balance sheet and strong cash flow, alongside our disciplined approach to managing working capital and focus on driving efficiencies and productivity across the business.”

Investment director at AJ Bell, Russ Mould, commented that while Card Factory’s increase in group sales was “decent” given poor weather and economic uncertainty, increases in freight costs and the national living wage had seen this translate into an “alarming drop” in H1 profit.

“When you sell a keenly priced product your profitability is sensitive to any increase in costs,” Mould commented.

“Card Factory may have been flagging such an impact but seeing it in black and white in the results does seem to have spooked investors, with the shares also having run hot into the release of the numbers.

“Being a budget option has been key to Card Factory’s success, with the company also benefiting from the woes of rival chain Clintons. There is now an onus on the company to demonstrate it can claw back some margin in the second half of the year.”

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