Card Factory blames soaring wages for profits plunge

Card Factory has blamed a slump in profits on escalating costs, including a hike in national minimum wage rates.

The retailer’s half-year report to the end of July revealed pre-tax profits had dropped 43% to £14 million, despite store sales increasing by 3.7%.

According to the business, which has nearly 1,000 shops in the UK and Ireland, profits fell by £64.4 million in the six-month period because of store and warehouse wages.

Card Factory said the profits plunge was because of “substantial increases in national living wage” as well as “freight inflation and phasing of strategic investments”.

But chief executive officer Darcy Willson-Rymer remained positive about the company’s performance. He said: “As we move into the second half of the year and the important Christmas trading period, our expectations for the full year are unchanged and we continue to focus on managing inflationary pressures within the business.

“Our strategic growth ambitions are underpinned by a robust balance sheet and strong cash flow, alongside our disciplined approach to managing working capital and focus on driving efficiencies and productivity across the business. Moving forward, we believe we are well placed with a strong proposition that resonates with a broad customer base and delivers an unrivalled quality, value and choice offering.”

In April, the national living wage increased by 9.8% to £11.44 per hour for all those aged 21 and above. Last year, hourly pay rates were £10.18 for 21-22-year-olds and £10.42 for workers aged 23 and over.

Data from Brightmine in July revealed the impact of April’s 9.8% increase to the national living wage had continued to affect the median basic pay award, with it remaining almost three percentage points above inflation.

But for businesses, the national living wage rise contributed an additional 1% to affected employers’ overall pay bill, HR consultancy Paydata found.

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