Economy

Moonpig lowers revenue guidance following Royal Mail strikes

Shares of Moonpig plummet after greeting card group slashes sales expectations as Royal Mail strikes hamper deliveries

  • Moonpig now expects to post around £320m in revenue this financial year
  • Further strikes by Royal Mail employees are expected on six days in December
  • Hargreaves Lansdown analyst: ‘Ultimately, the market is nervous about Moonpig’

Moonpig has downgraded its annual sales outlook due to economic uncertainty and recent postal worker strikes that disrupted delivery.

The greeting card retailer now expects to post around £320 million in revenue for the year ending April, about £30 million lower than its previous forecast, although adjusted underlying earnings expectations remain the same.

It told investors on Wednesday that union action by Royal Mail workers, seeking wage increases in line with inflation, negatively impacted last-minute card-only orders in the UK in September and October.

Prediction: The greeting card retailer now expects to post around £320m in revenue for the year ending April, around £30m lower than previous forecast

Further strikes are planned for this Friday and Sunday, Wednesday and Thursday next week, and December 23 and Christmas Eve, potentially causing headaches for businesses and households.

Commerce was also hurt by a slowdown in retail sales as skyrocketing energy bills weighed heavily on consumer spending and forced companies to raise prices.

Moonpig Group Shares plummeted 16 percent this morning to 127 pence following the release of the trading update, making them the biggest faller on the FTSE 350 Index.

Their value has fallen by about two-thirds since the company, founded by former Dragons Den star Nick Jenkins, was listed on the London Stock Exchange in February last year.

Short sellers have built up record volumes of the group’s stock, anticipating a drop in demand as the boom in online ticket buying during the pandemic abates and customers tighten their wallets.

For the six months to Oct. 30, orders across the retailer’s Moonpig and Greetz brands fell 2.6 million year-on-year to 16.9 million, mainly due to the lack of lockdown restrictions.

Overall sales only escaped a decline due to higher ticket prices, more targeted use of promotional discounts and the contribution of gift experience brands Red Letter Days and Buyagift, which were acquired in July for £124 million.

The company has diversified its product offerings away from cards in recent years, selling more gifts, ranging from afternoon tea to helicopter lessons, flowers and spa breaks, to boost sales.

It said there was a “significant opportunity” to increase the share of card-related gift orders, as only about 20 percent of current Moonpig and Greetz purchases include a gift, as does the share of greeting cards sold online.

But heightened economic pressures are already leading the group’s customers to switch to cheaper goods, reducing profitability, while the pace of new customer growth has slowed compared to the previous year.

Sophie Lund-Yates, chief equity analyst at Hargreaves Lansdown, said: ‘The sad truth is that as the cost of living crisis continues, people are just not inclined to throw chocolates and flowers into their virtual baskets.

“Unfortunately, this is also a trend that is likely to continue at least into the first quarter of next year and will severely limit margin potential. Ultimately, the market is nervous about Moonpig. Where meaningful growth comes from is a question mark.

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Jacky

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