Just two or three years ago, there was a lot of talk about Thorntons being another victim of the structural demise of the high street.

Just two or three years ago, there was a lot of talk about Thorntons being another victim of the structural demise of the high street.

This simple interpretation overlooked a bigger problem however, in that Thorntons’ woes were caused, at least in part, by its retail and wholesale businesses cannibalising one another.

After all, why would consumers pay more for a product in a Thorntons branch when they could go around the corner to a supermarket and get the same - or very similar - product for a fraction of the price?

In hindsight, the dangers of this kind of strategy are pretty obvious – and probably help to explain why the company briefly flirted with oblivion last year as financial pressures began to mount.

Since then, Jonathan Hart, Thorntons’ chief executive, has begun to turn things around by taking a robust and determined approach to shifting away from the company’s underperforming own-branded stores and gravitating towards supermarket sales instead.

It’s a strategy that seems to be working: even though Thorntons closed 35 of its own stores during the year, its commercial sales grew by 11.2% to £88.7 million.

In addition to de-leveraging the company’s store portfolio, Mr Hart and his team have also helped to reinvent the company’s wholesale offering by introducing new products and creative licensing deals that help consumers to differentiate between its retail and wholesale businesses.

The results speak for themselves, and the company is in good spirits after posting forecast-beating full-year profits of £5.6 million for the year ending June, up from £900,000 a year earlier.

Like-for-like sales, which strip out the effect of store closures, fell just 0.8%, which isn’t actually too bad given the state of the market, and certainly an improvement on the previous year’s 3.8% slide.

What’s even more impressive, however, is that Mr Hart and his team have been able to make such significant structural improvements under the watchful gaze of their shareholders and financial analysts.

The public market can be a very difficult place to turn a business around, which is precisely why many retailers continue to trade with legacy problems, rather than facing up to some hard decisions that could hurt their share price in the short term.

But that is where Mr Hart’s bravery has paid off. Thorntons’ management team not only correctly identified how to improve the company’s long-term prospects, but also managed to communicate this vision to its shareholders in order to keep them on-board. 

The result? Thorntons recorded a net profit of £4.2 million in the 12 months ended June 29, compared to a net loss of £898,000 a year earlier, and its share price tripled in the past year.

For Thorntons’ management team and shareholders alike, success has probably never tasted so sweet.

  • Dan Coen, director, Zolfo Cooper