IG warns on profits due to supply chain crisis

Jo Francis
Tuesday, October 26, 2021

IG Design Group's share price has slumped after the group issued a profit warning due to the impact of supply chain disruption and input cost increases.

Group produces more than 1bn metres of gift wrap every year
Group produces more than 1bn metres of gift wrap every year

The news wiped more than 30% off the group’s share price in early trading today (26 October) following the announcement, with shares falling to a 52-week low of 301.11p at one point. 

At the time of writing the share price was down by 31.25%, or 137.80p, to 303.20p. (52 week high: 653p.)

The gifting, stationery, craft and creative play business said that like-for-like sales were up 11% in the six months to 30 September, but expected growth had been crimped by the supply chain issues.

IG said that sea freight costs were “up significantly across all regions, alongside raw material and labour inflation as well as supply availability issues”.

First half operating margins were hit by the supply chain and input cost headwinds, and IG said it expected these challenges would continue “into the second half of the current financial year and also into FY23, although it remains difficult, at this time, to estimate the impact”.

It has revised its forecast for full year operating margins and expects the results to be 175-225 basis points lower “resulting in full year earnings being significantly below current market expectations”.

In the financial year ending 31 March 2021 adjusted operating margins fell from 5.6% to 3.4% due to the impact of Covid-19 restrictions on manufacturing and distribution during that period.

Group CEO Paul Fineman described the situation as frustrating and unprecedented.

He said: "It is more than frustrating to have to report a decline in expected earnings at a time when demand from our customers remains so positive, driven by the continued execution of our strategy and our best ever portfolio of products, brands and service.

“However, we are not immune to the unprecedented supply chain issues affecting just about every sector, including the significant increase in shipping costs, and despite our best and ongoing efforts to mitigate the impact, these factors have affected our margins. No one knows how long these supply issues will last and we are taking a cautious approach to the near-term outlook, especially in light of the recent increased Covid-19 concerns.”

IG Design Group had sales of $873.2m (£633m) in the 2020-21 year, having switched to reporting in US dollars after the acquisition of CSS Industries in March 2020. 

IG Design Group’s products are sold in more than 210,000 stores worldwide, and its customers include Walmart, Target, Amazon, Costco, Lidl and Aldi. 

The group’s Tom Smith brand also holds a Royal Warrant for the supply of Christmas crackers and Christmas wrapping paper to HM the Queen. 

 

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