In the News Teaching Activity – Card Factory profits slump (Sept 2024)

Why have the profits of the Card Factory been falling?

Card Factory's half-year pre-tax profits plunged 43% to £14m, despite a 3.7% rise in sales. The retailer cited soaring costs, particularly a 9.8% rise in the National Living Wage, pushing staff and warehouse wages to £64.4m, or 28% of sales. Higher shipping and packaging expenses added further pressure. Despite this, the company expects to meet full-year profit targets, though shares dropped 21%. Investors remain cautious, particularly ahead of Christmas trading and potential cost increases from forthcoming workers' rights legislation.

Card Factory blames surge in costs including wages for slump in profits | Business News | Sky News

1. Explain why Card Factory’s costs have been rising?

2. The article notes that ‘the wider retail sector continues to see widespread consumer caution’. Why are consumers cautious at the moment?

3. Using a cost/revenue diagram, show how the rising costs faced by the Card Factory have reduced profits.