Chocolatiers Thorntons have seen a remarkable turnaround in their annual profits, the result of a three year programme of cost-cutting and streamlining. The strategy, which has involved the closure of over 100 stores in recent years, is representative of a shift away from sales in its own stores to focus on online sales as well as increasing its presence in supermarkets.
In the last year, the chocolate makers have closed 39 stores, with the result that sales fell in store by 7.4 per cent to £94.9 million. Nevertheless, sales at stores that had been opened for over a year reported in increase in sales of 1.1 per cent compared to a decline of 0.8 per cent last year. Furthermore, sales in supermarkets flourished, up 9.7 per cent to £99.4 million, helped by sales of ‘The Snowman’ products. Sales online were also boosted by the popularity of luxury and chocolate hampers, which proved to be very popular according to Jonathan Hart, CEO of Thorntons.
Hart announced that he was pleased with the results, which he believed indicated a “continued strong recovery in our profitability”. The improvement is “a testament to the strategy we put in place just over three years ago”, according to Hart. He added that the business had also successfully completed a refinancing deal, which would allow it to support growth, adding that he anticipated further modest growth in the UK business in the first half of the new financial year.
Hart remained cautious of the permanence and strength of the economic recovery, saying: “We do not anticipate things will get better for our key shoppers”, and as a result, the company’s “growth plans are not reliant on an economic upturn”. In spite of continued austerity on the high streets, however, Thorntons has improved its outlook, and the “challenging environment and subdued consumer sentiment make our progress all the more notable”, according to Hart.
The closure of stores has reduced operating costs, which increased operating margins from 4.5 per cent in the year from 3.4 per cent last year. A focus on the company’s commercial development is a sign of the business’s determination to create a “strong UK multi-channel retail presence”. The company’s international business also grew 4.9 per cent to £6.4 million.
Thorntons’ share price was 0.95 per cent lower to 104p by mid-morning on the London Stock Exchange.