Britons buy more greetings cards than any other nationality per head. Statisticians even include them as “staples” in inflation calculations. Card shops have still been forced to close during lockdowns. That has benefited online card and gift retailer Moonpig. Booming sales and profits spurred private equity owners Exponent to advance plans on Tuesday for a mooted £1bn London listing.
The national penchant for greeting cards has not been kind to public investors in the past. A letter from the administrators is all that Clinton Cards shareholders received in 2012. Shares in the remaining listed business Card Factory have lost 90 per cent of their value since peaking in 2015. Both suffer the same malaise that is hurting other bricks-and-mortar retailers. Moonpig's online business case may stack up but investors should be wary of a valuation boosted by the pandemic.
UK card sales volumes overall have declined by about 1 per cent annually. Retailers have been able to maintain the value of sales by compensating with higher prices. Moonpig says that its technology and customer data allow it to upsell more profitable gifts alongside cards. Sales of £156m in the six months to October were 135 per cent higher than the previous year. About half came from gift sales, the proportion of which has steadily risen in recent years.
An impressive 80 per cent of revenues come from returning customers. Ebitda margins of 26 per cent should get to a full year number of £80m, double last year’s result. The mooted £1bn valuation of 12 times is shy of the racy tech multiple bankers are pushing for. But it is in line with Card Factory shares at their 2015 peak.
That seems reasonable, assuming sales and profit growth can be maintained in the absence of lockdowns. Permanent closure of physical competitors should help too. But Moonpig has managed to grab an extra slice of the UK market thanks to unfortunate, but temporary, circumstances. Buyers should be wary of sellers trying to keep that fact under wraps.
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