Chocolate specialist Thorntons saw its profits decline by more than half during the first six months of its turnaround period, results released today reveal.
Retail sales fell 5.5 per cent like-for-like in the 28 weeks ending January 7th 2012, total own-store trading dropped 7.9 per cent and franchise sales plummeted 13.4 per cent compared to the same period last year.
This resulted in its profit before tax reaching just £3.1 million in the half, down from £8.4 million during H1 in 2011.
Despite the difficulties in trading the retailer’s board still expects the business to operate within its borrowing facilities and banking covenants for the “foreseeable future”, and the group will continue with its restructuring strategy.
During the first half Thorntons closed 20 stores at a cost of £0.7 million, and over the next three years it plans to reduce its remaining 344 store portfolio by at least 120 and as many as 180 through lease expiries.
Jonathan Hart, CEO of Thorntons, commented: “Our vision for the company is clear. We are pursuing our chosen strategy and have made good progress in implementing it while weathering a difficult market.
“These results and the economic climate only reaffirm the need for change. We have a well-managed balance sheet, quality asset-backing and good cash generation.
“The board is confident that Thorntons has the expertise and the resources to successfully complete this transformation and restore profitability.”
Along with constrained consumer spending, H1 results were further hampered by a decline in gross margins of 4.2 per cent thanks to a continued increase in raw material costs and a re-weighting of operations from retail to wholesale.
Its strategy to focus away from high street trading was given further credence by a 6.9 per cent rise in revenues for its commercial arm, which sells its products to supermarkets, during the period, however this was less of an increase than was previously anticipated.
Overall revenues dropped just £3.5 million year-on-year to £130 million for the six months and international sales grew from £2.2 million in 2011 to 2.6 million, with particularly strong performances in the tax & duty free sector and in the Middle East.
Several new initiatives were trialled by the company during the half, including product ranges and a new store prototype in Birmingham, while a revamped Thorntons website is to be launched this spring.
Hart added: “The economic and retail environment will remain challenging and uncertain for the foreseeable future, certainly through 2012, but we are encouraged by our strong range for the remaining key spring trading seasons of Mothers Day and Easter and have a strong order book to support this.”