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The Card Factory (LSE:CARD) share price fell sharply in early trading today (7 May), after announcing its results for the year ended 31 January 2025 (FY25).
Claiming to be the “first choice to celebrate all life’s moments”, the group reported a 6.2% increase in revenue and a 2.3% fall in profit before tax (PBT), compared to FY24.
But adjusted PBT was £1.9m higher than its statutory equivalent. This might not sound like a lot but adjusting for these one-off items means the group’s able to report an increase in adjusted earnings per share (EPS) from 13.5p to 14.3p. On a statutory (accounting) basis, EPS fell by 1.4p.
The stock now trades on 6.5 times adjusted earnings. This is low by historical standards.
Income investors will be pleased that the dividend has been increased by 0.3p to 4.8p. This morning’s pullback in the share price means the stock’s now yielding just over 5%. Of course, payouts are never guaranteed.
Looking ahead, the group’s expecting to deliver “mid-to-high single-digit percentage increases” in adjusted PBT for FY26. It’s seeking to enter the American market for the first time and expand its trading relationships with its overseas partners.
Unlike many companies, Card Factory’s able to report: “We currently do not expect there to be a material impact from tariffs on the group’s financial performance in FY26.”
| Metric | FY21 | FY22 | FY23 | FY24 | FY25 |
|---|---|---|---|---|---|
| Revenue (£m) | 285 | 364 | 463 | 511 | 543 |
| EBITDA (£m) | 46 | 86 | 112 | 123 | 128 |
| Profit before tax (£m) | (16) | 11 | 52 | 66 | 64 |
| Net debt (£m) | 108 | 74 | 57 | 34 | 59 |
| Basic earnings per share (pence) | (4.0) | 2.4 | 12.9 | 14.4 | 13.8 |
| Stores | 1,016 | 1,020 | 1,032 | 1,058 | 1,090 |
A confusing reaction
With rising sales, increased earnings (albeit on an adjusted basis) and further growth expected this year, the group appears to be in good shape.
That’s why today’s share price reaction – after recovering some of its earlier losses, it was down about 3% by 10am – seems odd to me. What were investors expecting? Prior to the announcement, the company was indicating that everything was going to plan and that trading was in line with expectations. Its FY25 results confirmed this but the share price still tanked.
Possible issues
It could be that investors are concerned about the impact of the increases in the National Living Wage and employer’s National Insurance. These are expected to cost the group around £14m in FY26. But the directors have factored this in to their forecasts.
One area to watch is the group’s borrowings. At 31 January, net debt (excluding leases) was £58.9m. That’s a £24.5m (71%) increase on a year earlier.
On reflection, it looks to me as though Card Factory’s one of those companies that’s overlooked by investors because it’s a little old-fashioned. It trades from over 1,000 physical stores and derives very little of its revenue from the internet. Unusually for a company these days, its results announcement didn’t mention artificial intelligence!
Final thoughts
Prior to today’s results, the average 12-month price target of the seven analysts covering the stock was 154p. Even the most pessimistic reckons the group’s worth 120p. That’s a significant premium to today’s share price of around 94p.
But over the past 12 months, its share price performance has been erratic. In September 2024, it fell 21.1% after releasing its interim results. And it’s down again today.
On the face of it, Card Factory looks to be a solid business and has grown consistently in recent years. But I don’t want to invest as it appears unloved and out-of-favour. I fear that its share price isn’t going anywhere.
