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Can Clinton really have more stores on the cards?

Having profitably got shot of over 100 loss-making stores from its Birthdays subsidiary through an administration, Clinton Cards is back on the look-out for new stores as it seeks to expand its estate again. By Glynn Davis, City editor


Can Clinton really have more stores on the cards?

This is something of a surprise in light of the fact it off-loaded its worst Birthdays stores and then cherry-picked the best through a buy-back of 196 units from the administrator at a knockdown price. To now be adding units must be pretty galling for many landlords who took a hit when taking back those weaker unwanted stores.

Let’s hope this newly found zeal for expansion does not land the company into trouble again, as it did with the disastrous initial purchase of the Birthdays business in December 2004. It certainly didn’t turn out to be a great Christmas present for Clinton shareholders.

The confidence to grow comes on the back of its recent results (for the 52 weeks to August 2) that show the group back in positive like-for-like territory. Highlighting how things have been turned around after the administration process is the like-for-like gain of 2.9 per cent enjoyed in the first 10 weeks of the new financial year, which compares with a decline of 3.3 per cent for the Clinton-branded stores. Although we do not have numbers for the Birthdays chain, it will have been a nasty red number for sure.

Despite the good current trading the company is reluctant for the City to get too carried away, especially as it has announced it will be halving its capital expenditure and largely be in consolidation mode. Quite how this strategy fits in with its plans to expand the store portfolio is a bit of a mystery.

What is clear is that the company will continue to run its two-brand strategy and is in fact looking at further developing a fledgling third brand – Pure Party. At the present there are 15 outlets and the aim seems to be to grow into a chain of as many as 200 stores. The company reports that progress has been good but party products seem to be an area where the likes of Poundland and Wilkinsons are in control.

With themed sales peaks revolving around the big events like Halloween there must be a lot of seasonality with this category, which suggests there must some lean times during the course of the typical year.

Couldn’t Clinton therefore commit more of the floor space in its existing stores for these ranges? At its Clinton Cards chain 61 per cent is given over to cards, 10 per cent to gift dressing and 29 per cent to gifts.

Surely many of the Birthdays stores that it got rid of were a result of the group being over-shopped and so it seems rather strange for management to already be talking about building another sizeable chain to operate alongside its Clintons Cards and shrunken Birthdays chains.

Of more interest are the launch of a Pure Party online store and the development of the Clinton Cards website to include more personalisation. This has taken off online and Clinton should have more authority in this area than it has, having allowed the pure play retailers to steal a march on it.

Despite some of the concerns over the addition of new stores, Clinton Cards has its followers and many investors will have done well over recent months as its share price has motored ahead by over 50 per cent during the last quarter. This has been largely down to the administration and the recent positive 10-weeks trading update.

There won’t be another administration to benefit from but there will be more opportunity for the company to deliver some decent like-for-like uplifts as the comparatives are pretty soft. However, over the longer term there must still remain question marks over the business model of specialist high street card sellers.

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