Greetings card and gift chain Card Factory saw profits slump more than 40% in the first half of the year as it battled against rising staff costs following the increase in the National Living wage and the wet weather.

The high street stalwart, which has over 1000 stores throughout the UK and Ireland, said pre-tax profits fell 43% to £14 million in the six months to end July.

The news sent the shares plummeting 25p, or 17.5%, to 118p in early trading.

The direct store and warehouse wage bill went up by more than a quarter to £64.4 million, squeezing the gross margin, after the National Living Wage wage rose by almost 10% in April. Other pressures included rising freight costs.

The company also said it faced “a challenging retail backdrop and the drop in high-street footfall seen in the first half due to the continued impact of economic pressures on consumer spending and confidence, combined with the unseasonable weather.”

Group sales were 6% higher at £233.8 million in the period.

The company said expectations for the year as a whole were unchanged as a result of the strong sales growth, “combined with our robust actions to mitigate inflationary pressures.”

CEO Darcy Willson-Rymer said: “As we move into the second half of the year and the important Christmas trading period, our expectations for the full year are unchanged and we continue to focus on managing inflationary pressures within the business. Our strategic growth ambitions are underpinned by a robust balance sheet and strong cash flow, alongside our disciplined approach to managing working capital and focus on driving efficiencies and productivity across the business.”