Insider: director deals include this recovery play

There’s plenty going on at these high street names. City writer Graeme Evans reveals the big boardroom deals happening in the past few days.

9th December 2024 07:54

by Graeme Evans from interactive investor

Share on

shoppers retail high street 600

A Card Factory (LSE:CARD) director has followed the retailer’s “milestone” deal in the United States by spending £20,000 on shares at a price a third cheaper than in September.

Finance chief Matthias Seeger dealt at 94.1p, having just seen the stock jump 4% in response to his firm’s swoop for Minnesota-based gifts and celebration essentials business Garven.

Thursday’s share price rally also reflected relief that its second half trading has so far been in line with expectations, including an encouraging start to the Christmas season.

Card Factory operates more than 1,050 stores in the UK and Ireland, with its in-house design and manufacturing operations seen as giving it a competitive advantage in the greetings card, gifting and celebrations market.

Partnerships are a key part of its growth strategy having sealed deals in the UK with Matalan and Aldi. Overseas, it now has exposure in South Africa and the Middle East as well as a supply agreement covering over 1,100 stores across the US.

The $25 million (£19.6 million) acquisition of Garven means that the Wakefield-based firm will have a physical presence in the world's biggest celebration occasions market worth $70 billion. Chief executive Darcy Willson-Rymer called it an “important strategic milestone”.

Garven has an established retail customer base, which will allow Card Factory to explore design and buying synergies and to introduce its own ranges into the US wholesale market.

Card Factory shares have fallen from 143p since September’s half-year results, when substantial increases in the National Living Wage plus freight inflation and phasing of strategic investments caused a 34% reverse in half-year adjusted profits to £14.5 million.

Revenues rose 5.9% to £233.8 million, underpinned by like-for-like growth of 3.7% and an online improvement of 8.8%. Partnerships contributed £6.6 million.

Willson-Rymer reiterated full-year guidance, noting the second-half weighting of its performance due to a material contribution from efficiency savings.

On Wednesday, shareholders are due to receive an interim dividend of 1.2p a share after the repayment of Covid-era loans had earlier allowed the company to resume distributions through the £15.5 million payment of 4.5p a share for the 2024 financial year.

UBS expects payouts to grow to almost 6p a share by 2028, given that cash flows should support an upside from new partnerships and/or materially increased shareholder returns.

It said after September’s results: “Often overlooked as an old-school retailer, demand for Card Factory’s products is low growth but remarkably resilient, with consistent outperformance driven by store roll-out and category expansion.

“The group’s vertically integrated business model allows for stable mid-teen margins with limited cash drag.”

UBS said last week that uncertainty over Christmas trading and National Insurance changes had weighed on shares, leaving them on a valuation of six times next year’s earnings.

This represents a 40% discount to the company’s 10-year historical average “despite offering a stabilised core business with material upside potential from geographical expansion”.

Frasers and FTSE 100 demotion

Two senior board members of Frasers Group (LSE:FRAS) have spent a total of £70,000 backing the recovery of the retailer after it downgraded profit guidance and lost its place in FTSE 100 index.

Board chair David Daly and senior independent director Richard Bottomley spent £20,000 and £50,000 increasing their shareholdings at prices of 645p and 672p respectively, which compares with 746p prior to the setback in interim results.

Daly is a former Nike executive who has led the Frasers board since 2018, while Bottomley has over 25 years’ experience working with listed companies as a senior partner at KPMG.

Having been 882p in September and 938p last Christmas, the demotion of Frasers after two years in the FTSE 100 index was already known prior to the half-year results.

Headline profit fell 1.5% to £299.2 million, with the Sports Direct UK trading surplus up 3.4% to £255.2 million and the company boosted by progress on international expansion.

However, it has faced tougher trading conditions “both ahead of and after the Budget”. Frasers added that measures in the Chancellor’s statement in October will mean £50 million of incremental costs going into 2026 financial year before any mitigating actions.

Guidance for the year to the end of April is now £550 million-£600 million, still better than last year’s £544.8 million but down from previous guidance of £575 million-£625 million.

Peel Hunt lowered its estimate for 2026 financial year profits from £647 million to £595 million and cut its price target from 960p to 720p.

It said: “The shares were weak into the print and weak out of it, but we see no catalyst for Frasers to regain investors’ faith.”

Shore Capital pointed out that consumer weakness has not been unique to Frasers, with JD Sports Fashion (LSE:JD.) and Footlocker both flagging a softening of sales in the UK and US.

It said: “With the election and Budget now out of the way, and with household income data suggesting a more buoyant picture than is reflected in confidence levels, we still hope that there is time for some improvement in the crucial Christmas period."

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Related Categories

    UK sharesTax

Get more news and expert articles direct to your inbox