A CARD piece in today's edition (full text below for reference)... provides a degree if insight into the issue - as per zip00 - of the City getting it "wrong".
Liberum now forecasts a total divi of 23.9p for this year - which implies a "special" element of pretty close to the 15p they've sustained for the past three years. As I've previously argued, I think this is just too high - it doesn't square with management guidance, nor do I think it should EVER have been expected, given the more "mature" balance sheet position they've now reached.
For the following two years they now forecast a divi of 17.7p - so an implicit "special" of more like 8p. This is more reasonable - but for this year (ie. FY18) IMHO, not just reducing to this for FY19 and FY20. It would be a more sustainable level, based on FCF forecasts (ie. dividends being fully covered by FCF, not relying on further increases in leverage, as has been the case with the special dividends for the past 3 years).
But quite why the analyst had to cut his FY19/20 total divi forecasts by 30% to get to these levels, in the first place, defeats me... Equally, I am not sure his price target (240p, down from 260p) squares with, on his own numbers, a 10% yield for this year and a sustainable yield well over7% thereafter. It all smacks of CARD being a classic victim of unreasonably inflated expectations... and, perhaps, its own success?
"Greetings cards-to-gifts retailer Card Factorys (CARD) income credentials have weakened following a warning (11 Jan) full year earnings will disappoint due to continued margin pressure. We mentioned Card Factory, which pays a big chunk of its shareholder rewards as special dividends, in an article spelling out the dangers of such an approach in last weeks issue.
Given subdued footfall, earnings growth for next year is likely to be limited amid foreign exchange and wage-related cost pressures. While like-for-like sales grew 2.7% in the 11 months to 31 December, this was driven primarily by lower margin non-card categories such as gifts and dressings, with card sales being stable.
Given margin pressure, Liberum Capital has cut earnings forecasts again and dramatically reduced its dividend estimates for the historically generous dividend payer. Aside from what was a secure dividend we did not view Card Factory as a growth stock but an income play and until we gain more confidence that margins have troughed then the dividend outlook is less clear, writes Liberum, trimming its year to January 2018 dividend per share (DPS) estimate by 3% to 23.9p, with its 2019 and 2020 forecasts slashed by 31% to 17.7p. We cut our DPS by 30% in full year 2019 and beyond as we move to a covered free cash flow (FCF) position and a declining debt profile which we feel is much more appropriate when both topline and cost pressures persist, explains the broker, paring its price target from 260p to 240p.
A hold rating is retained in light of a sharp share price fall to 220p that leaves Card Factory trading on a 10.9% prospective dividend yield."
Have a pretty large holding in Card, all purchased after the fall , in 7 blocks.
I had been looking at Card for some time, but had not done much research on them, but having some spare time prior to going on hols , I did do quite a lot of work to decide whether to invest, well that research gave me the confidence to invest.
Why the "city" have hammered this share is somewhat of a mystery, the offer is unique, the board of non execs have a very impressive retail history, cash generative, good divi well covered, etc etc . I did not bring my research notes with me but will go into more detail in 10 days time, but suffice to say I am well happy with my purchases to the extent I bought another tranche today.
Cannot always get on the Internet, first time today, so made sure my purchase was a pretty large one.
Roger Whiteside, Chief Executive Officer, bought 22,520 shares in the company on the 15th January 2018 at a price of 219.90p. The Director now holds 22,520 shares.
Card Factory has been notified that on 15 January 2018, Elizabeth Whiteside, the wife of Roger Whiteside, the Company's Independent Non-Executive Director, purchased, in aggregate, 22,520 ordinary shares in the Company at an average price of 219.9p per share. The transaction took place on the London Stock Exchange.
Show of confident , stop worrying guys. always a good sign when directors buy a decent amount of shares.
I've got 3 batches of Card shares, all have a sell trade listed at 3 different targets, closest is 250 the other 2 much higher. The way I understand the rules on shorting if you have a sell (trade) price set then they can't be shorted, not that my few makes much difference but if all small holders did this might help a little.....
"Given the moaning and groaning I am hearing on other boards, I respectfully suggest that iii would be better off trying to manage a dealing platform that actually works, rather than churning out dodgy pieces of "research" (sic)..."
Indeed so and as one that has suffered loss through the uselessness of iii`s new platform,I`ve done more than my fair share of moaning.
Useless platform and useless analysis on stocks.
They are quite rightly getting torn to shreds here :
My main issue is - their numbers don't stack up! Quite a big issue, really, when you are writing articles essentially based on such a quantitative screen...
They quote a dividend yield of 6.8% - which implies a divi around 14.6p (of which broadly 5p would be a "special"). Fair enough - may well be a reasonable expectation for this year IMHO. Yet they also quote a dividend cover of "1x" - which does not compute with the current forecasts for EPS of around 18.5p this year, which would be cover of 1.3x (vs 19.8p previous FY EPS, cover of c.1.4x).
My sense is there is, most likely, a disconnect between the overall (ie. ordinary + special) dividend level assumed in the yield figure and that assumed in the dividend cover level. An example of the dangers of relying on the numbers churned out by third-party web data sources! No substitute, as always, for DYOR...
FWIW the yield on the ordinary divi alone is currently around 4.4% (prospective) - with cover of just under 2x.
And of course, all of this ignores CARD's (very strong) profile on FCF cover...
Given the moaning and groaning I am hearing on other boards, I respectfully suggest that iii would be better off trying to manage a dealing platform that actually works, rather than churning out dodgy pieces of "research" (sic)...
Glad to read that some people who I regard highly are still providing calm, sensible and positive comment here! CARD has been on my radar a while (even though I usually shun retail) and the price fall last week was unjustified in my opinion. So I crystalised a 15% profit on Tullow Oil (that I had been looking to exit because of volatility) and bought into CARD at 216.8p.
Appreciate it might be difficult to visit a CARD Shop from your part of the world. You will have to keep up with e the faithful reporters on here who keep informing the market how busy the shops are.
Card is fairly unique, it makes it's own products and sells on price. It's vertically integrated model makes it very difficult to compete with.
Clinton's are closing stores and the Supermarkets don't compete on price.
The foot fall is continually up with customers filling the shops with there small purchases.
In cash strapped Britain shoppers do not want the be ripped off for £2.50 for an anniversary card when they can buy a perfectly good one from CARD for 59p.
Actually you might in some respects compare it with Gregg's the bakers. Towns that have one, have a loyal band of customers.
Card's strong suit is Free cash flow which at the the moment the market is not focused on. The recent hit is because of inflationary pressures from Sterling's fall last year. The CEO has indicated those winds are abating.
The story is very much intact with shops being opened in Ireland.
While the high street is changing and being remodeled this should keep it's place with small shops, very high footfall and very profitable sales per square metre.
I have nothing in this, was brought to my attention by a post by "sound money "
Took a quick look at financials/fundamentals, seem sound enough, only very minor negative I noticed was an increase in debt/leverage.They are on the expansion trail though so to be expected.
I like the business model.
On to chartview/TA, my opinion is that it is oversold.
I like to look at potential price support and resistance levels to ascertain overall Risk/Reward levels.
I have support at 211 then 201.
I have resistance at 252/271/280.
These are not predictions, merely levels that some ( mostly traders ) could be looking at. They can prove to be wrong.
However I think the Risk Reward ratio favours a buy or a SB ( spreadbet ) long.
I`m looking to buy an initial share tranche ( depending on today`s price of course )
Maybe SB long after I have followed the price action for a while.
In any one month, one twelfth of the population will have a birthday. Add to that a regular flow of anniversaries and then the "special" days such as Valentines, Easter, Christmas, Weddings and regrettably funerals/condolences and it is plain to see that here is a business with a consistent demand and cash flow. Because they are producers as well as vendors, they have greater control over cost prices than their competitors. Even though those cost prices may increase slightly, the advantage still exists. Certain material costs, such as paper/board/ solvents/inks, if imported, are priced in US dollars, so are subject to exchange fluctuations. Inflation risk can be overcome by small price increases. Shop stock control/wastage. is determined internally, not via an outside supplier.
Competition exists from e-cards but you can't put one of those on the mantelpiece,
nor can you enjoy the sight of a small child opening its birthday card.
The market has taken undue fright. Card Factory still expects to make a profit of circa £90million - just a dip of about £7 million. Still a very good and profitable business.
If the market wishes to target a card shop with a weaker business, perhaps Clintons is the vulnerable one.
All in all, Card Factory has a lot going for it, as the footfall in the shop confirms. Be patient, and let the noise subside, the company plans unfold and the present Brexit fed hysteria to pass by and time will reveal a handsome profit, with dividend income in the meantime .
This is a buying opportunity.
you would think that it is easy to just put a few pennies on here and there but as CARD tried this , I read somewhere ,and it hurt sales and this was abandoned in favour of current strategy .customers are really price conscious these days .the food manufacturers simply cut size to counter inflation ,not available to us .all we can do is attack costs on the input side and grit our teeth waiting for someone to go out of business .
"The re-rating reflects the change in expectation, from continued growth to flat earnings for the next year or two.... given an undemanding PE, continued store expansion and strong market position, sentiment could quickly improve, especially if the Brexit outlook brightens... Can Clintons survive?"
We already knew earnings would be flattish for two years (or at least, two FY reports)... the outlook is now a bit softer still, but as Serious points out, only by 6% or so, not the 25% the market has been quick to discount (or more, depending on your starting point). I actually question how closely the market - and at least some of the analysts supposedly following CARD - have actually been studying this one (as per my earlier comment on the 15p 'special', which was never a realistic expectation for the current year).
Clintons is owned by American Greetings, so much will depend on how healthy overall the parent is - I haven't looked at them closely. If their own domestic business is still thriving, could be it is ripe for disruption, too... though much as I'd like to think of CARD launching an all-out assault across the Pond and cleaning up there, I suspect that is beyond their capacity, at least until much further down the line...
"The price drop is a concern that maybe the market has some information that us PI's don't."
Sometimes the market does know something that we don't, Pathfinder - but far more often not. As above - in this case, I actually think it knows less... at the very least, I am sure the market is not doing the hard-yard primary research, on the ground, that Pathfinder and quite a few others on here are and reporting dutifully back!
As for optimism... you have to be optimistic in this game, ultimately, as there is no future in the alternative! True pessimists never buy stocks, because they'll always be able to find a reason why they might go down... At the same time, I'm not so sure we'll see a strong rally next week (though would be nice), nor 280p by the time of the next divi, as per Serious (though would also be nice).
But I am fairly confident that the market mood is simply not of a mind to tolerate anything particularly "UK" and/or "Retail" which even hints at disappointment - and equally, that this mood will change. It always does... It won't be enough, on its own, to resurrect CARD if its own financial performance disappoints further, but such a "pessimistic" view simply does not square with our reporters' dispatches from the front-line, of packed shops and queues at the till. And this is in a market where a good chunk of the customer base is still unfamiliar of the CF brand and offering (as my own "research" tells me)... just think of what CARD the stock might be able to do, from here, when they are!
Investors were optimistic before the trading statement .... not now. The re-rating reflects the change in expectation, from continued growth to flat earnings for the next year or two. This is no surprise in the curent retail environment, but given an undemanding PE, continued store expansion and strong market position, sentiment could quickly improve, especially if the Brexit outlook brightens. Anyhow, I would not want to be in Clinton managements shoes. Can Clintons survive?
I'm still optimistic.
I've held these shares for over a year now.
There are 4 Card Factory shops within a 10 mile radius of where I live and 2 Clinton Card shops.
I make a point of checking the footfall when I am in the vicinity of any of these shops.
I've never seen any of the Card Factory shops without a queue at the cash desk.
I've never seen more than 2 people in the Clinton shops and I've never seen anybody at the cash desk in Clintons.
The only other real competition appears to be Supermarkets, and my research has shown them to be lacking in choice and over priced.
The quality of the Card Factory product has also improved over recent years.
In my view they could easily add 10% to prices, which would drop straight through to the bottom line, and still retain their price advantage as their cards are amazing value.
The price drop is a concern that maybe the market has some information that us PI's don't.
good points ! obviously less risk buying at these prices .....can't see another big fall coming but equally can't see a catalyst for a recovery either .what a dismal outlook for bricks and mortar retailers but then again capitulation , which is what we are witnessing here with CARD, is the bottom of sentiment .cheers from a gloomy valeite
I am frankly very surprised by the high levels of optimism being shown by the contributors regarding this share. I feel that this flys in the face of all that has happened over the last few months namely two large price falls and a current price in the low £2. Buying now seems to be unwise, remember the old maxim about a "falling knife". Hope I'm wrong. But sp down another 10 per cent today.
Used up the last of my loose cash on another tranche at 218p this morning. Only just avoided having to sell a momentum stock to do so, it feels v uncomfortable not knowing what am I going to use to snap up the next bargain.
While GBP:EUR has settled in the region of 1.12-1.13 the exchange rate has strengthened against pretty much every other currency GBP:USD is now 1.35 from 1.25 at the time when (my interpretation) Hubbard was over-stocking at the worst possible time last year. Good news if GBP continues to improve?
After tax earnings will improve by up to 1% as the full effect of reducing UK Corp Tax from 20% to 19% is applied? No doubt factored into the announcement, but still that increases the free cash that would otherwise be available.
"So topped up my Portfolio holdings yesterday and bought an initial holding in my SIPP first thing."
I too have bought a few more @217p - much like Games, I didn't think I would be, but money where one's mouth is, and all that... Not a huge additional tranche, at this stage... but with a view to adding more, if and when circumstances compel.
Assessing 'fair value' has always been tricky for this one. This time last year I put it at 300p - even then, it was always a balance between a muted near-term outlook (eg. external cost headwinds) against a possible (yes, possible, too early to say "probable") dramatic long-term market-share story.
For much of 2017 this looked conservative (on the basis of fundamental newsflow, not SP trends). Yesterday's report demands some kind of discount, while keeping this in proper dispassionate perspective, rather than going full 'Corporal Jones'. So much more like a 5-10% "value" impact rather than your Peel Hunt 40%... I would say 275p for me, hardly demanding if the long-term story plays out even in part - and thus a Strong Buy in anyone's maths.
I sold out at 350 I thought it had a good run and re entered 300 range after divi, four tranches down to 285 not a massive amount. Marks was same when it 392 I got out then in too early again. I never get the bottom!
I still think this is a good stock to hold, might be me but I like to look and give a card, Christmas cards on the side are nice.
Perhaps they could expand abroad next would be nice, they are still the cheapest card shop by a mile.
See what tomorrow brings , director buys for this and Marks are very encouraging, its one of my buy signals. Would be nice if we brought stocks back we could put brokers in them and throw eggs at them, thats how I feel today.
"Last week Peel Hunt reiterated a Buy and £4.00 target, this week it's a hold and £2.40.
I'm not impressed or reassured by their mea culpa, just irritated by their insouciance... Useless, clueless, overpaid and taking themselves far too seriously. Most brokers have no better idea than the average private investor."
Mister Ed - yes, I hear you. I am often the first to defend or at least explain the broker perspective - without going into detail, I know the species VERY well - but this sort of thing ends up tarring the whole lot with the same (decidedly rough-tined) brush.
Broker targets are - or at least should be - far more considered assessments of where 'fair value' lies, rather than actual SP predictions... most brokers understand (along with the rest of us) that the latter are pure guesswork amid a myriad of (mostly unknonable) influences, internal and external. But the idea that a business is "worth" 400p a pop one day and 240p the next stretches both credibility and credulity...
The truth is (IMHO), it was worth quite a lot less than 400p yesterday - and probably also quite a lot more than 240p today. Emotional reactions are rarely rational ones... the same goes for "emotional" price targets!
FWIW most of them are neither clueless nor useless (I can't speak for the Peel Hunt man in question, as I don't know him) ... and as a group they are a lot less overpaid than they use to be, and only likely to become less so - if indeed they are paid at all, as many will find out in due course. I am not so sure about your "average" private investor - the "average" is pretty underwhelming in my experience - but yes, there are plenty who can (and do) knock spots off a good chunk of the professional analyst community.
Last week Peel Hunt reiterated a Buy and £4.00 target, this week it's a hold and £2.40.
I'm not impressed or reassured by their mea culpa, just irritated by their insouciance.
I ignored them last week and also today. Useless, clueless, overpaid and taking themselves far too seriously. Most brokers have no better idea than the average private investor.
No time for modest recovery after reinforcing my loss with an expensive top up this morning. Really caught out today, not knowing the update was coming has cost me dearly. Back to at least 250p sharpish please.
"Market speculating whether special dividend is in danger. They could reduce it, but I suspect they won't can it... A 10p special, would still be 'special'... Likelihood is that if it meets the surplus capital criteria, and the forward looking economics look reasonable, they might maintain the special at 15p... Obviously you can't guarantees, but the could be delivering a total (with special) return of circa 10%..."
Muzzle - it has been clear for a while that we weren't going to get another 15p special this year - in fact, we never were... it was always partly a function of an under-geared balance sheet which has now reached a more "mature" position (though hardly stretched, of course). Personally I think they've done well to keep it going as long as they did (3 years running, I think?) - that was not a consensus expectation back at the IPO. As such, any disappointment is them becoming victim to their own success....
I have seen broker expectations for a 5p "special" this year, implying a total yield around 6.3% at today's lower SP - not too bad in itself. They may still do more - the FCF yield is close to 9% at this level, and that alone would suggest more a 'special' more like your 10p, without dipping into debt (all else equal). But that is on last year's FCF - it remains to be seen what impact the lower forecast profits will have on actual FCF, and there has been some suggestion (eg, in interim results) of other negative cashflow items which could see it quite a bit lower still.
"... if Corbyn gets in, and takes us back to the 1970's, I expect card sales to fly..."
Yes, every chance... and if Uncle Jeremy gets in, the value of our Card Factory shares will be the LEAST of our concerns...
"A rare thing. An ii article that I'm impressed with."
Yes SM, I am with you there. Generally sensible stuff - albeit somewhat lacking in specific detail when it comes to what the "right price" might be now.
And it does quote Peel Hunt's Jonathan Pritchard - or at least, his previous views - the same Peel Hunt analyst who has today capitulated (see my 'Corporal Jones' reference in earlier post). Some analysts often get too close to the companies they follow, and tend to take even minor set-backs very personally, eliciting excessively emotional reactions - only time will tell if this is the case here (I do not know Mr Pritchard), but he certainly wouldn't be the first to turn bearish right at the bottom - or the last.
What we need is some proper, dispassionate long-termers to come out of the woodwork... either that, or I'll have to go back in and do the job myself...
I am guessing a retrace to £2.50, with maybe a boost later to £2.7.
Market speculating whether special dividend is in danger. They could reduce it, but I suspect they won't can it.
A 10p special, would still be 'special'. That assumes it will be reduced from the original 15p, which its been for the last two years. Likelihood is that if it meets the surplus capital criteria, and the forward looking economics look reasonable, they might maintain the special at 15p.
Obviously you can't guarantees, but the could be delivering a total (with special) return of circa 10%.
Anyway, if Corbyn gets in, and takes us back to the 1970's, I expect card sales to fly, as he bans the internet, nationalises the jam butty mines, and makes Diane Abbot Minister for Everything is lovely that I say.
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