Thorntons today reported a 5.6% boost in fourth quarter sales as its commercial arm drove a strong performance. The City reacted positively to the figures.
“Today’s fourth quarter update follows the announcement a fortnight ago that FY13 would be ahead of consensus (of £4.6m). Q4 was a good quarter for Thorntons, with commercial sales up 11.8% and retail like-for-likes rose 0.5%, both against the toughest comparatives of the year and marking accelerations from the respective Q3 rates. We increase our pre-tax profit by 16% from £4.5m to £5.2m and full-year 2014 expected pre-tax profit increases similarly from £6m to £6.8m.” – Bethany Hocking, Investec
“It’s a good job that Thorntons’ financial year ran to June 29, as the hot weather ever since then will not have helped chocolate and fudge sales, even if some shops also sell ice-cream now. Still, the strategy of pushing ‘commercial’ sales to supermarkets etc and shrinking the Retail exposure seems to be working, with Thorntons confirming today that the year just ended saw a better than expected profit outcome.” – Nick Bubb, independent
“Although the fourth quarter only covers a short ten week period, the results from Thorntons demonstrate the progress being made towards moving the company away from retail to a commercial footing. Indeed, the decline of 6.7% in own store sales across the whole year is due, primarily, to the closure of some 34 outlets.
“This moderation of the retail footprint is, in our view, a necessity and Thorntons deserves credit for its efficient engineering of the change. Part of the underlying issue for the company is the fact that it uncomfortably straddles the two stools wholesaling and retailing. In recent years a push of product through the former channel has undermined the necessity for so many high street stores and has weakened the ability to charge a full price for product. This coincided with the rise of premium chocolate rivals, notably Hotel Chocolat, which are now better positioned to serve the high street consumer seeking indulgent, luxury product.
“By itself a decline in the fortunes of the retail business would be worrying. However, they are more than balanced out by the increase in the commercial side of the business where sales have increased by 21.1% in the latest quarter and by 21.5% across the whole year. The bulk of sales here (around 87%) come from the UK arm which involves selling Thorntons branded product to the supermarkets and others. This approach leaves Thorntons well placed to benefit from the relatively consistent footfall at grocery outlets, compared to the high street locations of its retail outlets.” – Neil Saunders, Conlumino