Card Factory shares dropped more than 25 per cent on Friday morning after the retailer warned that annual profits would fall significantly short of expectations.

This comes after major retail and hospitality groups warned Rachel Reeves that business rate changes could put 120,000 high street jobs at risk.

The retailer said weak consumer confidence and reduced footfall on Britain’s high streets had hit sales during what is usually its busiest trading period.

Shares initially fell to around 70p following the update.

The fall left the company’s share price at its lowest level since December 2022. The Card Factory operates more than 1,000 stores across the UK.

Notably, the business had seen its share price rise since April after reporting stronger trading. The downturn comes as the key Christmas shopping season has not delivered the level of demand the retailer anticipated.

Card Factory now expects adjusted pre-tax profit of between £55million and £60million for the full year.

The forecast is based on current trading trends continuing over the remaining seven weeks of the financial year.

This projection is well below the roughly £70million profit the company had previously expected.

The British Retail Consortium (BRC) and UK Hospitality have argued business rate changes could force around 500 sites to close, as bigger businesses face higher bills, prompting 120,000 jobs at risk.

Card Factory had earlier told investors to expect mid-to-high single-digit growth on last year’s adjusted pre-tax profit of £66million.

The downgrade means profit could fall at least £6million below the previous year’s level.

In September, the company reported adjusted pre-tax profit down nine per cent to £13.2million.

The latest guidance marks a substantial setback for the retailer as it continues efforts to strengthen its margins through cost-saving measures.

Card Factory noted that financial pressures on British shoppers have been widely reported throughout the year.

A spokesman said: “It is an inescapable fact that these pressures have impacted consumer confidence and shopping behaviour, contributing to soft high street footfall.”

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The retailer said the difficult trading conditions persisted into its peak selling season.

A spokesman said: “Those conditions have persisted as we moved into our most important trading period, leading to a UK store sales performance which is lower than our previous expectations.”

The update highlights the pressure facing high street businesses as households continue to curb discretionary spending.

Card Factory said progress continues on its long-term strategic plans despite the weaker domestic performance.

The company pointed to advances in its Simplify and Scale productivity and efficiency programme.

The programme is designed to offset the effects of continued high inflation facing retailers across the country.

Operations outside the UK are performing more strongly. The retailer said its businesses in the Republic of Ireland and North America are trading in line with expectations.

The integration of Funky Pigeon, acquired from WH Smith in July, is progressing as planned.

Card Factory said work to improve efficiency and streamline operations has continued, even as UK store sales have struggled during the festive period.

The board reiterated its confidence in the group’s long-term strategy. The retailer confirmed that its share buyback programme will continue as planned.

A spokesman said: “The board remains confident in the group’s long-term strategy.”

Management said it still expects to announce a progressive full-year dividend.

The company said this remains in line with its capital allocation policy and its commitment to returning value to shareholders.

Card Factory said the combination of strategic progress overseas and investment in efficiency measures supports its confidence in the business despite the softer UK trading environment.

The company said it will continue to monitor consumer trends closely as the financial year progresses.