Comment: Does Card Factory have investor appeal?

Card Factory is undoubtedly an impressively run retailer, so in many ways reports that the owners of the budget greetings card chain are considering a float is not surprising.

Its vertically integrated model enables it to sell cards at very low prices. If you haven’t visited its shops lately, pay one a visit. You will find swarms of customers marvelling at the deals, which include six cards for £1, and while it’s not exactly Smythson of Bond Street, the quality easily matches that of its rival Clintons, while it undercuts it on price significantly.

It was this model that saw off an already struggling and lacklustre Clintons, which collapsed last year before being bought and relaunched as a much smaller business.

Yet oddly enough, in some ways the collapse of Clintons raises concerns over a possible float of Card Factory.

While the Wakefield-based retailer has undoubtedly benefited in the short term from the closure of just under half its adversary’s stores, some are concerned Clintons’ collapse reflects the weakness of the greetings card market generally.

The size of the market for single greetings cards, for instance, remained flat at £1.38bn in 2012. Volumes actually fell 5.5% to 952 million in that period. The rising price of a stamp can’t help prospects either. Consumers are surely less likely to bother sending a card when they are paying more for the postage than for the product itself.

And Card Factory’s aggressive expansion strategy across dilapidated high streets as well as top shopping centres will remind spooked investors of Clintons’ model. Rapid store openings of course did Clintons no favours as it became weighed down by high property costs.

And despite Card Factory more than doubling its property portfolio in six years to 650 stores, the retailer’s boss Richard Hayes insists there is room for 1,200 in total. He defends this large store bank by arguing that online accounts for just 5% of the market. Yet, as most retailers are devising ways to reduce their portfolios and invest in digital, potential investors may find Card Factory’s somewhat old-fashioned approach unsettling.