Thorntons announces that its UK Commercial channel within its FMCG division has faced challenges which have adversely affected its sales performance in the run up to Christmas.
Meanwhile, the Retail division is currently experiencing like-for-like sales growth. Against a strong comparative period last year, the Board now anticipates a decline in sales in the UK Commercial channel for the second quarter of the current financial year. The Board now expects earnings for the full year to be below those achieved for the last financial year.
During the first half there have been two principal challenges. Thorntons have recently experienced a significant reduction in previously indicated orders from the major grocers who also took in stock later than anticipated.
While there has been an overall decline, the performance in the grocers has been mixed with good growth in several of our major partners yet significant volume decline in some others where prior year sales of high-volume lines have not been repeated. The company has also seen good growth in the convenience and high street sectors.
Secondly, despite extensive prior testing, Thorntons encountered significant short-term difficulties with their new centralised warehouse which resulted in disruption for all of their customers. In particular in the UK Commercial channel they experienced lost and late sales with consequent missed promotional slots and reorders.
The warehousing and distribution facility is now working normally, and the move to a centralised warehouse was essential to meet current and future business patterns and growth. This will result in improved capacity and quality of service for their customers in the future.
Timely management action has resulted in good control of costs and stocks. Christmas seasonal specialities have sold well and no significant excess seasonal stock is anticipated.
Julie Palmer, Partner and retail expert at Begbies Traynor, said: “While most families will be reaching for the Quality Street and Celebrations this Christmas, it seems Thorntons is still failing to keep pace with the competition, surprising the market with a profit warning at the worst possible time of year for the struggling chocolatier.”
Despite reporting strong sales of its seasonal Christmas products, lower than expected orders from the UK’s largest supermarkets have hit Thorntons hard this festive season, reducing its visibility among its core customer base at what should be one of its busiest trading periods.
The Board remains confident in its strategy, multi-channel approach and ongoing transformation. A further trading update will be issued on 19 January 2015.