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

Shares in Moonpig plummeted despite a solid trading update as it said it would focus on selling greeting cards in tough economic times.

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

Ahead of today’s annual general meeting, Moonpig, founded by former Dragons Den star Nick Jenkins, said that selling greeting cards would be a priority in the current economic situation.

The London-based company claimed that demand for greeting cards has a “demonstrable track record of resilience” in good and bad economic times.

However, investors reacted poorly to the trading update, and Moonpig Group Shares fell 7.5 percent to £1.85 on Tuesday, meaning their value has plummeted by about 47 percent in the past 12 months.

Moonpig has expanded sales of gifts such as chocolate, flowers and champagne in recent years to increase revenues and margins.

But the easing of Covid-related restrictions has led to a slowdown in the online retail sector as consumers have returned to high-street shopping.

In the 12 months to the end of April, London-based Moonpig reported a 17.3 percent drop in sales as it processed more than 11 million fewer orders, although sales still rose about three-quarters on a two-year basis.

Average order size also increased 5.9 percent thanks to the growth of linked gifts. At the same time, the market share of greeting cards in the UK and the Netherlands climbed above two-thirds.

Since then, the company said robust demand for cards has seen average order value grow year over year, while margin trends have remained healthy thanks to the absence of severe input cost inflation.

Chief executive Nickyl Rainatha noted that Moonpig “continues to offer a powerful and unique combination of market leading 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-driven business model and the long-term opportunities in our markets.”

Moonpig further announced today that it forecast the company would return to pre-Covid seasonal trading patterns, with approximately 58 to 60 percent of annual revenue in the second half of the fiscal year.

However, Susannah Streeter, senior investment and market analyst at Hargreaves Lansdown, warned that these revenue prospects could be wishful thinking for the company.

She added: ‘Many more shoppers are expected to tighten their wallets and look for bargains in the coming months as household bills rise.

“Looking for cheaper cards and gifts will likely be a priority for many people, rather than wasting money on personalized items.”