The past few days have been tough for the Card Factory (LSE: CARD) share price. The UK retail share has been plummeting since it released fresh financials late last week. Further drops in Monday business mean that the greetings card specialist is now trading at three-month lows.
Card Factory’s dropped primarily on news of a fresh share placing. Is now the time to buy this UK share in something like a Stocks and Shares ISA?
Sales impress again
The Card Factory share price has enjoyed a strong run in recent times thanks to better-than-expected trading. Indeed, even accounting for those falls of recent days, the retailer’s more than doubled in value over the past 12 months.
And Card Factory confirmed that business has remained bubbly in last Friday’s trading statement. It said that the sales performance exceeded expectations following the easing of Covid-19 lockdown restrictions in April and May.
Card Factory also said that trading in recent weeks has been better than levels following the first and second coronavirus lockdowns. But like-for-like sales were down “marginally” in the last five weeks versus the same period in 2019.
Financial restructuring
In other news, Card Factory said that footfall has dropped in its stores. But it added that “customers are shopping less frequently but buying more,” helping it to overcome this problem.
Furthermore, its online sales have dipped as shoppers have been able to return to its stores, but “online sales are still exceeding pre-pandemic levels”.
As I said earlier, news surrounding an equity raise has prompted investors to head to the exits, despite the recent robust trading. Card Factory announced that it had increased its bank facilities by £25m to £225m. This comprises a £100m revolving credit facility, a £75m term loan, and facilities totalling £50m under the Coronavirus Large Business Interruption Loan Scheme.
it clocked in with net debt of £110m as of 16 May, a level the business aims to gradually reduce via that financial restructuring. It would be obliged to pay £5m in fees if pre-payments on this debt were not paid on time, it added. So it’s planning to generate £70m via a share placing to facilitate these repayments.
Why I’d buy Card Factory shares
Commenting on the news, chief executive Darcy Willson-Rymer said: “I am pleased we have secured increased banking facilities, which afford the group the headroom required to focus on realising the growth strategy.” In particular he said that that the restructuring would allow the firm to invest in its online capabilities.
I’m thinking of adding Card Factory shares to my ISA following that recent share price weakness. Sure, the company operates in a competitive landscape that could damage revenues growth. However, I think its low-price business model will attract people to its stores again now that Covid-19 restrictions are easing. And its improving e-retail operations should see it grab custom from the likes of Moonpig too.
