Moonpig shares slide as it says it will focus on resilient card sales

Shares in Moonpig tumbled despite a solid trading update as it said it would focus on greeting card sales in tough economic times.

The statement came despite Moonpig completing the acquisition of Smartbox Group, the owner of experiences retailer Red Letter Days, two months ago for £124million.

Ahead of its annual general meeting today, Moonpig, founded by former Dragons Den star Nick Jenkins, said the sale of greeting cards would be prioritised in the present economic situation.

The London-based firm claimed that demand for greeting cards has a ‘demonstrable track record of being resilient’ during good and bad economic times.

However, investors responded badly to the trading update, and Moonpig Group shares slid 7.5 per cent to £1.85 on Tuesday, meaning their value has plummeted by around 47 per cent in the past 12 months.

Moonpig has expanded its sale of gifts, such as chocolate, flowers and champagne in recent years as a way to boost revenues and margins.

But the loosening of Covid-related restrictions has prompted 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 per cent fall in revenue, as it processed over 11 million fewer orders, although sales were still up by about three-quarters on a two-year basis.

The size of average orders also increased by 5.9 per cent thanks to the growth in attached gifting. At the same time, its share of the greeting cards market in the UK and Netherlands climbed above two-thirds.

Since then, the company said that robust demand for cards has helped average order values grow year-on-year, while margin trends have remained healthy thanks to the absence of serious input cost inflation.

Chief executive Nickyl Rainatha remarked that Moonpig ‘continues to offer a powerful and unique combination of leading market positions, strong customer retention, high profit margins and robust cash generation.

‘Against the current macroeconomic backdrop, our continued performance reflects the strength of our data-led business model and the long-term opportunities in our markets.’

Moonpig further announced today that it predicted the business would return to pre-Covid seasonal trading patterns, with around 58 to 60 per cent of annual revenues set to be earned in the second half of the financial year.

However, Hargreaves Lansdown senior investment and markets analyst Susannah Streeter warned that this revenue outlook ‘could be wishful thinking’ for the firm.

She added: ‘Many more shoppers are expected to tighten their purse strings over the coming months and search for bargains as household bills mount. 

‘Scouting for cheaper cards and gifts is likely to be a priority for many people, rather than splashing the cash on personalised items.’