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93. Bull, Bear & Beyond – Card Factory: executive interview
6 Plays7 months ago
In this interview, Card Factory CEO Darcy Willson-Rymer provides an update on the progress the company is making on its ‘Opening Our New Future’ strategy following the publication of the FY25 results. Subjects covered include the developments in the company’s stores, online activities and partnerships. Darcy also discusses the company’s H2 weighting of profitability, the capital allocation policy and the outlook for the coming year and in the medium term.
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About ‘Bull, Bear & Beyond’
Bull, Bear & Beyond': features candid conversations with senior executives and from our own team of experts from across industries, exploring strategy, innovation, and the opportunities shaping their markets and 60-second pieces are a compressed summary of content designed to convey our message in a single, easily shareable hit.
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Edison covers 50+ investment trusts, read about them here: https://www.edisongroup.com/equities/investment-companies/
Original interview published on 06/06/2025 and reposted as a podcast
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Transcript
Introduction and Full-Year Results
00:00:07
Speaker
Hello, I'm Russell Poinsman from Edison, and today it's great to have back with us Darcy Wilson-Reimer, the CEO of Card Factory. Just released their full year results.
00:00:19
Speaker
Welcome back, Darcy. It's nice to be
Retail Business Strategies
00:00:22
Speaker
back. Why don't we start on the retail business? There were two things that stood out to me in the results. One is you talked about...
00:00:30
Speaker
you know the space reallocation, the store segmentation and the changes being made there. So could you just talk about what you've done and perhaps what's likely to happen in the future? ah Sure. So first of all, um I thought it was a really strong set of results where we announced growth of over 6%, both in terms of sales and profitability.
00:00:51
Speaker
But of course, the majority of our sales comes from our very healthy ah retail business, where we have over 1,090 across the uk and Ireland.
00:01:02
Speaker
um and ah Over the last few years, we've been evolving the offer through a combination of looking at range, space, display and service.
00:01:13
Speaker
So when it comes to um what we've been doing on display, we've been looking very ah hard at the space allocation. So what space we allocate to cards, to gift, to celebration essentials. and making sure that we have the balance right. And so what
Sales Growth and Space Allocation
00:01:32
Speaker
we've been doing is ah continuing to grow card sales, but disproportionately growing um attached gifting and everything that you need for you know four your celebration. So last year,
00:01:47
Speaker
um Despite the fact that we had reallocated 7% away from card to Gifted Celebration Essentials, last year we continued to grow card sales. our card sales grew by nearly 1%. So that's in a um flat market. We continued to grow our value and volume share.
00:02:06
Speaker
But our gift and celebration essentials, we grew disproportionately by 5.7%. And that that's combined, which is what gave us our like-for-like growth of of nearly 3.5%. And is there much more to come on thee ah the reallocation? So we um i think there was quite a bit of ah and there was catch-up to do when we did a sort of fairly substantial um change across the estate. It was nearly 900 stores. We're now in a sort of more business-as-usual mode where we continually evaluate what space we give to each range and and and the subcategories within it.
00:02:49
Speaker
to
Pricing and Product Range Strategy
00:02:50
Speaker
do two things. One is to maximize the sales and profitability per square foot, but also more importantly is to make sure that we've got the compelling um offer that our customers want to buy, whilst also dealing with um a shift in ah of what's going on in the market.
00:03:12
Speaker
Right, okay. And from a product perspective, you do mention the the results release about good, better, best pricing. So just talk about, you know, what is happening there? Is there much more to come on that? is Do you have pricing power, I guess?
00:03:28
Speaker
Yeah. So first of all, ah I think of it slightly differently than good, better, best. So um we're very clear on our pricing architecture. So if I take cards as an example, our entry price point is 29p and it's been 29p since the inset inception of Card Factory. We then go up to 49 and then 50p increments.
00:03:50
Speaker
$99, $149. the market at $399. And when I joined the company, the exit price was more like $199, maybe $299 in the season. um maybe two ninety nine in the season so we've we've we've pushed...
00:04:05
Speaker
The exit price in our recent relaunch of wedding product, we've stretched that even further. But the point of having that architecture is we have, you know, we help our customers celebrate their life special moments at any price point that they want to spend at. But what we're clear at each piece and of the architecture, so a 49 pence card, when you pick that up, it's going to offer unbelievable value. And it's the same if you pick up a 399 card, it's got substantially more value than a forty nine p card. it's got um a lotable words and and foil and embellishment. But when you pick up that $3.99 card, it's going to be the best $3.99 card in the market. That same card will sell, um you know, £5 and £6 in other places. So
Personalization and Online Growth
00:04:56
Speaker
it's just about making sure we've got the clear architecture against the products that our customers want to buy and that at each price point, we're the best value in the market.
00:05:06
Speaker
Okay, thanks. and So moving on to online, there are a couple of things that stood out to me in the results. One is obviously the closure of getting personal. So I'd say something about that. But then also in terms of the online, I think you said you you're reducing the the stock cards, going to more personalization. So just tell us what that is, what you know what what customer behavior has driven that. So two parts of that question, really.
00:05:29
Speaker
Sure. So first of all, we continued to evolve the on on online offer last year. So continue to improve our sites and a lot of testing. um so And we're very clear on what the drivers of growth and drivers of profitability are. And so it gives us confidence that we will continue to invest and get our fair share of the online market.
00:05:56
Speaker
um Getting personal um was a loss-making business that needed to be to be dealt with. So we closed that at the end of January. So our focus going forward is on cardfactory.co.uk.
00:06:08
Speaker
um It's important to know in the history that when cardfactory.co.uk was set up, it's set up with some personalization, but selling all of our store stock products.
00:06:23
Speaker
And so therefore, what customers were doing was buying some store stock product, maybe some personalization. We were then sending it back to them. But it's very difficult to make money online with our store stock product. And also,
00:06:38
Speaker
um We don't want to see sales transfer. And so our focus going forward is on a personalized print-on-demand card, which we will which is ah direct to the recipient.
00:06:53
Speaker
And, of course, that will come with attached gifting. So we expect attached gifting to go off the back of that. So that's our um that's mission one. So direct to the recipient with attached gift. And then mission two is then gonna be focused, which is in the future, around celebrations and how do we curate range for anybody's celebration that they might be having.
00:07:17
Speaker
So the launch of Click and Collect last year was the first step in that sort of omni-channel journey, We are in test now with balloon appointments. So you'll be able to go online, say, I'd like this type of balloon art or this type of balloon bouquet for my party. Choose what day you want to collect it, what time you want to collect it, what store you want to collect it from. So that's that's it in test now. And we'll continue to build out that sort of celebrations mission.
00:07:47
Speaker
And just to just a side question. on that I mean, ive I've been up to your print craft sites in in Yorkshire and the the ground floor is pretty full. that's where That's where the cards are printed for the shops, etc.
00:07:59
Speaker
But upstairs, there was there's a big empty floor with printing machines. So it struck me that you have quite a lot of capacity to do this without a lot of incremental investment in infrastructure. Is that is that a fair conclusion? Yes. So in terms of the print on demand, we have all of the infrastructure we need um and um we will, and with the capacity, so we will be able to ah continue to do what car factory is best at, which is competing on value and offering brilliant value for money you know to to the customer.
00:08:31
Speaker
Okay. And going back to cardfactory.co.uk stuff, I think it grew by 0.1% or something in the year. was It was relatively low growth. could you just i mean and i know people are probably, and whether they're too obsessed with the online growth versus the versus the the versus the retail. when When
International Expansion Efforts
00:08:48
Speaker
can we probably have look forward to better growth there? I know it's this balance between growth and profitability, right?
00:08:54
Speaker
Yes. so um so so look, I think one of the things that we've been doing is slowly removing store stock whilst we drive up personalisation. And that rebalancing is going to you to take time. um i don't i don't think it's appropriate for us to just sort of rip the Band-Aid off because we'll probably see ah perhaps perhaps it going backwards. So I think you this the strategy is clear. What will say, though, in in the u k By volume, 90% of all cards are sold in a physical store, 15% by value. So the vast majority of cards are sold um you know in physical stores.
00:09:38
Speaker
And we absolutely believe that that will continue long into the future. Now, the online market is growing. off a very small base and our intent is to take our fair share of that market.
00:09:53
Speaker
Great, thank you. right Let's move on to partnerships. um the keith i mean there's There's been lots of activity in partnerships over the last 12 months. One thing that stood out to me was this in in the Middle East where you effectively changing what you're doing, moving from... Franchise.
00:10:09
Speaker
fragchised Franchise too they just fra franchise to ah the So so what so what what wasn't what wasn't really working in the Middle East? Yeah, so let's take a step back. yeah When we launched the partnership strategy, we tested a a whole pile of things. And we have a culture at Card Factory of tested learn.
00:10:30
Speaker
And so we tested a wholesale model. We tested a wholesale model where we fulfill, where the customer fulfills. We tested white label and we tested franchise.
00:10:42
Speaker
So we did all of that. Our conclusion through all of that is... to our The main model that we're going to go forward in our partnership program is a full-service wholesale model where we work with um our partner to curate the range of card gift celebration essentials.
00:11:04
Speaker
and and then And then effectively on card, we will do the merchandising. So that's the model going forward. Specifically to the franchise, mean, effectively, there's two really key pieces of learning. First of all, if you take the card factory brand into a market where that brand doesn't exist,
00:11:27
Speaker
um we can grow the brand, but it will take longer and take more investment to do it. And the second piece of learning is where you're a gift-led customer journey. So so in the UK, typically in North America, where it's card first, whereas in the Middle East, it'll be gift first.
00:11:52
Speaker
And of course, if you're if you're then leading with gifts, um it's a different type of gift that you need to have and it would be a completely ah different type of range. Now, again, we've got the skills, the expertise to do that, but the time and the investment required do that. So our conclusion is the wholesale model is the right one for us going forward.
00:12:14
Speaker
Of course, the most exciting thing is what you haven't asked me about, which is about the test that we're doing in in the US, where um we we with a retailer, we tested a very small range, sort of 40 to 50 tests.
00:12:31
Speaker
Christmas cars on a freestanding display unit, which we manufactured the UK, shipped to the US. A lot of learning on how to work in the US, how to work with 3PLs, how to get stuff into 49 states, 1,100 stores to the back, to all of that that kind of stuff. We repeated that Valentine's Day, Mother's Day.
00:12:53
Speaker
But what where where we are now is we have ah got just shy of 100 stores, so 93 stores, in an everyday trial. So
Financial Strategies and Expectations
00:13:01
Speaker
we've got a full range of card offer alongside an incumbent supplier. And we get to see exactly how our product resonates with with the U.S. consumer. So again, along the lines of our test and learn, slowly um you know develop the the right offer for but do it in a profitable way from the outset. Right.
00:13:27
Speaker
So apologies for not asking about the US, sir. So let's move on to just je jones some general corporate questions. First of all, um a bit like last year, you're pointing to a second half weighting of profit versus you know versus the first half. And not then last year, that that there was a bit of nervousness, in the which was reflected in the share price rise in terms of you know whether this the half-two profits will come through. And you delivered on that very well, as you said you would.
00:13:56
Speaker
So looking into this year, what's what's what is driving the H2 weighting this year? Yeah, I mean, it's very simply so. If you think about... um So in the first... So our sales are weighted to the second half.
00:14:10
Speaker
So in the first half of of this year that we're in, we have the full-year effect of last year's national living wage,
00:14:21
Speaker
And then the start of this year's living increase plus plus the national insurance and the general inflation. And, you know, i inflation at the moment is running significantly higher than it has been, know, historically The opportunities to offset, there's greater opportunity to offset in the second half, given a combination of just the sheer volume that we do, but also with Christmas being um ah quite a substantive season for us, the ability to adjust range and adjust price, you know, e etc. So um all of the plans that we need to have in place to continue to offset inflation are in place.
00:15:07
Speaker
We talked about how we've taken um our approach and our methodology to structural cost savings. So we've packaged that up into a program called Simplify and Scale um to help colleagues ah engage and and fully understand that. That's multi-year. It's not just...
00:15:28
Speaker
last year and this year, where we identify um whether it's whether it's process, whether it's systems, whatever it is to drive your sort of innovation and productivity.
00:15:40
Speaker
and so And we will continue to use technology the levers of productivity, um you know efficiency, and um yeah range change and and and pricing. So utilizing all of those levers to offset inflation. And I think one of the things that we're particularly proud of, if you have a look over the last three years, the year we're in and the preceding two years, we've had 60 million pounds of inflationary costs coming into the business.
00:16:12
Speaker
And we were a 66 million PBT business last year. So if unmitigated, right, there would be no profit. And the fact that we've continued to grow sales, continue to grow po profit whilst offsetting ah nearly 60 million pounds of inflation, the team have done an absolutely outstanding job.
00:16:33
Speaker
And yeah we will continue to work in that way. That's great. Thank you. So
Capital Allocation and Shareholder Rewards
00:16:39
Speaker
let's talk to the capital allocation policy. So we're back into dividends. And I know there's certain investors would like share buybacks. Shares investors prefer dividends. So can you just talk about what you you know the capital allocation and how you're thinking about those?
00:16:54
Speaker
Sure. um So first of all, acknowledge that there's many voices in um in in the debate about what's the best way to reward shareholders and and acknowledge that um different investors have different requirements and have different preferences.
00:17:15
Speaker
um And so we kind of acknowledge that and understand um our shareholder base and and and what the different requirements are. Our capital allocation policy, i think, is very clear. we we we reinforced that about about a year ago. And there's four principles that underpin it, um which is you maintain a strong balance sheet, invest in the future the invest the future of the business,
00:17:42
Speaker
have progressive ah a progressive dividend and a progressive way to return cash to shareholders. And then finally, if there is any excess cash, it's about the just the discipline that we have with cash. And if we have any excess cash, it's to return that to to shareholders. I think when we...
00:18:03
Speaker
reintroduce the dividend, I think that's widely acknowledged that that was the right thing to do, to to reinstate the dividend and to make it a progressive dividend. um And if we have um excess cash, all options are on the table for the board to consider in in in order in the different ways that we could return that.
00:18:26
Speaker
But fundamentally, the focus
Future Growth and Strategy Outlook
00:18:27
Speaker
of the business is to is to drive the top line sales, drive profitability, convert it to cash, and make sure that we balance out the experience of the customer to get them best value in the market, reward our colleagues for all of their hard work, but reward shareholders um for their for their capital and for their patients.
00:18:50
Speaker
That's great. Thank you. And finally, we've talked about all the individual bits in the company, and but you just published your results. So what do you think were the key takeaways from the results this time? Yeah, so look, I think it was just a strong set of results at growth ah in sales and adjusted PBT of of of of over 6%.
00:19:08
Speaker
We see our store estate continues um to grow and and you know deliver the results. We have more work to do.
00:19:19
Speaker
um in online and and again partnerships kind of moving along. I think as as ah as I think about this year that we're now in, we're off to a good start. So um yeahre pleased with um Valentine's Day and Mother's Day. So that was in line with our expectations. We've got um all of the ah activity in the pipeline, whether that's to continue to drive sales in store, with range, um with with display, you know with with with service. And we confirm our expectations to grow your profit by mid to high single digit this year.
00:20:08
Speaker
and and And we go again. Darcy, that's great. Thank you for the rundown of the results and what's happening in the business and good luck for the coming year. Brilliant. Nice to see you again.