Moonpig shares fall as company to focus on ‘sustainable’ greeting cards amid economic uncertainty, despite buyout of Red Letter Days owner
- Moonpig completed the acquisition of Smartbox Group two months ago
- The company’s stock price has fallen about 47% over the past 12 months
- The easing of Covid restrictions has caused a slowdown in the online retail sector
Shares in Moonpig tumbled despite solid trading results as the company said it would focus on selling greeting cards during tough economic times.
The announcement comes despite Moonpig completing its £124m acquisition of Smartbox Group, owner of the Red Letter Days retail experience, two months ago.
Ahead of its annual general meeting today, Moonpig, founded by former Dragons Den star Nick Jenkins, said selling greeting cards would be a priority in the current economic climate.
The London-based company says demand for greeting cards has “demonstrated resilience” through good and bad economic times.
New focus: Ahead of the annual general meeting, Moonpig said that in the current economic situation, the priority will be to sell greeting cards.
However, investors did not react well to the update of the trades, and Shares of Moonpig Group fell 7.5 per cent to £1.85 late last night, meaning their value has plummeted by around 47 per cent over the past 12 months.
In recent years, Moonpig has expanded into gifts such as chocolate, flowers and champagne to boost revenue and margins.
But the easing of Covid-related restrictions has caused a slowdown in the online retail sector as consumers have returned to shopping on the high street.
In the 12 months to the end of April, London-based Moonpig reported a 17.3 percent drop in revenue as it processed more than 11 million fewer orders, although sales were still up by about three-quarters over two years.
The size of average orders also increased by 5.9 percent due to the growth of applied gifts. At the same time, its share of the greeting card market in Great Britain and the Netherlands exceeded two-thirds.
The company has since said that strong demand for the cards has driven average order value higher year-over-year, while profitability trends have remained healthy thanks to the absence of major input cost inflation.
CEO Nikhil Rainato noted that Moonpig “continues to offer a powerful and unique combination of market leadership, strong customer retention, strong margins and robust cash flow.
“Against the current macroeconomic backdrop, our continued performance reflects the strength of our data-driven business model and the long-term opportunities in our markets.”
Moonpig also announced today that it predicts the business will return to pre-Covid-19 seasonal trading patterns, with around 58-60 per cent of annual revenue expected to be generated in the second half of the financial year.
However, Hargreaves Lansdown senior investment and markets analyst Suzanne Streeter cautioned that the earnings outlook “may be wishful thinking” for the firm.
She added: “Many more buyers are expected to stretch their wallets and look for bargains in the coming months as their home bills rise.
“Finding cheaper cards and gifts is likely to be a priority for many people, rather than spending money on personalized items.”