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Card Factory warns of annual loss, covenant breach risk; shares drop

Card Factory signage is seen on a shuttered branch in Hackney

(Reuters) - Card Factory Plc warned of an annual loss on Thursday and said it risked breaching its covenants by this month-end as Britain's retail sector continued to get hit by the COVID-19 pandemic, sending its shares nearly 3% lower in early trade.

The greeting card retailer said it expected to report a loss before tax of about 10 million pounds ($13.65 million) for the year ending Jan. 31, compared with a profit before tax of 65.2 million pounds a year earlier.

However, online sales continued their strong run, with a like-for-like sales growth of 137% in the 11 months to December.

The Wakefield-based company said it was in talks with its banks over covenants and added that its current banking facilities will be sufficient if the latest lockdown does not extend beyond April.

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Britain went into a third lockdown in January to contain a highly contagious mutant variant of the coronavirus.

The retailer, which has more than 1,000 stores across the UK and Ireland, kept its guidance for fiscal 2022 suspended and said it expected full year revenue of about 284 million pounds, significantly lower that the 451.5 million pounds reported last year.

"Despite this challenging environment, the business built momentum to achieve sustained positive like-for-like sales of more than 17.7% from 1 October 2020 to closure of stores across the UK on or before 3 November 2020," Card Factory said.

($1 = 0.7328 pounds)

(Reporting by Aniruddha Ghosh in Bengaluru; Editing by Ramakrishnan M. and Rashmi Aich)