The chain, which has more than 1,070 stores across the UK and Ireland, reported a 43% drop in pre-tax profits to £14 million for the six months to July 31.
It said the hit came after its wage bill was sent surging by April’s near 10% increase in the National Living Wage.
The group also suffered from higher international shipping and packaging costs.
Shares in the firm slumped by nearly 16% in early morning trading on Tuesday, despite assurances from Card Factory that it remains on track for full-year profit expectations as it takes action to offset the cost impact.
Darcy Willson-Rymer, chief executive of Card Factory, 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.”
The group said its profits took a £64.4 million hit from store and warehouse wages in the first half – now representing 28% of sales – after the National Living Wage rose by 9.8% on April 1.
This took the shine off otherwise robust trading as like-for-like sales rose 3.7% across its stores in the first half.
Card Factory said it is taking measures to make savings across the business in the face of the higher costs, such as a new workforce managing system and efficiencies across support functions.
It is also hoping that trading over the crucial Christmas season will help outweigh the cost pressures.