Moonpig (MOON.L) shares fell sharply on Wednesday, down as much as 18%, after it cut its sales forecast for the year thanks to Royal Mail postal strikes and a cost of living crisis reining in consumer spending.
The greeting card and gifts business said that “conditions have become progressively more challenging through October and November,” citing continued macroeconomic uncertainty and industrial action at the UK postal operator.
The group added that the industrial action hit last-minute UK card orders around each strike day in September and October, and that it now expects revenues of £320m for the current financial year.
This is compared to the previous guidance of around £350m.
“Levels of new customer acquisition have decreased year-on-year and we have seen consumers trading down to lower gifting price points at Moonpig and Greetz,” it said.
It also posted a 21% fall in adjusted pre-tax profits to £18.9m for the six months to the end of October, while cash profits stood at cash profits of £34.6m.
Revenues edged just 0.1% higher to £142.8m over the period compared with the same period last year.
“As the clear online leader in greetings cards, Moonpig Group is positioned to benefit as the market continues the long-term structural shift to online,” Nickyl Raithatha, chief executive, said.
“Despite the difficult trading environment, we have delivered a robust set of results and with our data-led model we are ideally positioned to capture the significant long term opportunities in our markets.”
He added that 24-hour service and gifts, which are delivered separately by DPD and not affected by strikes, are being utilised to avoid disruption.
But the negative trading update sent the stock to the bottom of the FTSE 250 on the day. Moonpig’s share price is down more than 68% since it floated in February last year.
Adam Vettese, analyst at social investing network eToro, said: “The hedge funds currently shorting Moonpig will be licking their lips following the greeting card company’s half-year results.
“The shorters are betting against the firm having a tough Christmas as households tighten their belt due to the cost-of-living crisis. There are signs that is happening, with the firm this morning slashing its full-year revenue outlook, reporting flat sales and a large slide in earnings.”
Meanwhile, Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: “The real issue here is that these challenges are likely to rear their head again until the ongoing dispute can be ironed out. It’s also going to put customers off using the service at all. If you can’t guarantee your card will make it in time, there’s little motivation to pay the premium charged by online card-sellers, whose main unique selling points are fast service and convenience.
“A natural solution would be to seek another distribution partner, but this is a big step. Swapping providers increases operational risk and would be a long, protracted process at the best of times.”
She added: “Ultimately, the market is nervous about Moonpig. There is a question mark over where meaningful growth comes from. Recovery in revenue is one thing, and this may well come through the pipes in time, but real, sustained growth is another consideration entirely. It’s something the market isn’t sure we’ll see any time soon.”
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