Festive cheer boosts profit outlook for UK's Card Factory

By Aby Jose Koilparambil

(Reuters) - UK greeting cards retailer Card Factory lifted its full-year earnings forecast on Tuesday after people flocked to its high street stores to buy Christmas cards as Royal Mail strikes deterred online sales.

Shares of the FTSE SmallCap firm rose as much as 9.2% to 95 pence, their highest level since May 2021.

The upbeat forecast from Card Factory comes after clothing retailer Next last week trumped Christmas sales forecasts, signalling British consumers had not cut back heavily on spending as feared in the wake of a cost-of-living crisis.

Greeting card and gift retailers also faced shipment challenges during the crucial Christmas and New Year trading period on the back of long-drawn strikes at postal and parcel firm Royal Mail.

"This is another very impressive update highlighting the positive momentum in the business as the post-COVID recovery driven by management's self-help initiatives and shoppers returning to stores," Liberum analysts said in a note.

New initiatives that helped boost sales included the launch of a trial click and collect service in September.

Card Factory said it expects core earnings to be at least 106 million pounds ($128.8 million) for the year ending Jan. 31, compared with analysts' current consensus of 96.9 million pounds. In November the company had said it expected full year earnings to be at least 96 million pounds.

Sales jumped more than 28% to 432.6 million pounds in the 11 months ended Dec. 31, while like-for-like store revenue grew 7%, helped by strong Christmas trading.

The retailer said the return of customers to high street stores and the impact of strikes at Royal Mail saw online sales fall 27.6% year-on-year, but were more than 85% higher compared to pre-pandemic levels.

Shares in the Wakefield, UK-headquartered company had risen by nearly a third last year.

Card Factory said it had continued to successfully manage inflationary pressures and had hedged energy costs until September next year.

In contrast, Card Factory's bigger rival Moonpig last month flagged Britons were buying cheaper gifts amid the cost-of-living crunch and cut its annual revenue forecast.

($1 = 0.8227 pounds)

(Reporting by Radhika Anilkumar and Aby Jose Koilparambil in Bengaluru; Editing by Savio D'Souza, Subhranshu Sahu and Susan Fenton)