How the analysts have reacted to encouraging 0.7% like-for-like sales in the fourth quarter at embattled chocolatier Thorntons.
“Thorntons’ update confirms further encouraging progress coming through to restore profitability. This builds on the good work of the third quarter and gives us quiet confidence that Thorntons may even post a profit in its 2012 financial year, underscoring its credentials as a classic, self-help turnaround story that should increasingly attract the attention of investors. Charles Stanley Securities analyst Peter Smedley
“While it is good news that Thorntons’ own store like-for-like sales have returned to positive territory, any enthusiasm needs to be tempered by the fact that underperforming stores are gradually being shut leaving a rump of more successful shops where trading is stronger. Indeed, these closures created a strong decline in total own store sales over the period.
“Nevertheless, we hold to the view that Thorntons is still right to moderate its store portfolio, especially as it ramps up wholesale and commercial sales. On the commercial front, the latest quarter was extremely positive with sales up by 42.6%; in large part this was driven by the introduction of new ranges that coincided with the Jubilee celebrations.
“Longer term our view remains that Thorntons is fast moving away from being a retail brand and is becoming much more of a mid-market player in terms of positioning. These adjustments are causing some short-term pain to the business but are a necessary adjustment for long-term survival.” Conlumino managing director Neil Saunders
“We have noted the share price perking up of late, as if some good news was in the offing and, for a pleasant change, today’s fourth quarter trading update certainly contains no bad news, with profits running in line with management expectations, despite all the competitive pressures. Poor old Thorntons usually has to put up with headlines about “melting” profits and “wilting” sales, as chocolate does not sell well when it’s hot, but this summer’s cool and wet weather has been ideal for Thorntons!” Independent analyst Nick Bubb
“While only a short nine week period, the positives emerging bode well for Thorntons’ self-help efforts going forward. The continuous improvement in the own store like-for-like run rate over the year reflects strength in ongoing stores and a more tactical focus on cash generation in stores earmarked for closure.
“We sense a more cautiously upbeat tone, despite understandable concerns on a “difficult trading environment”. We leave forecasts unchanged ahead of the September prelims, although with actions taken delivering some improvement already, we see risk now weighted to the upside.” Investec analyst David Jeary