October 10, 2012 9:31 am

Store closures slow Thorntons decline

A programme of store closures has slowed the rate of decline in sales at Thorntons, as the lossmaking chocolate retailer sounded a cautious note ahead of the peak Christmas trading season.

The struggling confectioner is midway through a strategic shift to close almost half of the locations in its own-store network, instead targeting increased sales through supermarkets and franchised outlets.

The London-listed group on Wednesday reported a 1.7 per cent fall in like-for-like sales to £21.7m at the 320 stores owned by Thorntons in the 14 weeks to October 6 – a slowdown from the 7.8 per cent decline in the same period a year ago.

Sales from its franchises were down almost one-quarter to £2m, impacted by the collapse of Clinton Cards, one of its main franchisee partners, in May.

However, a near-10 per cent increase in sales to supermarkets and other retailers kept total group revenues in the quarter relatively flat at £46m.

“Consumer spending and the wider economy remain weak and difficult to predict. We are therefore cautious in our outlook for the peak trading season ahead and have set our plans accordingly,” said Jonathan Hart, chief executive.

“We continue to have confidence in our strategy to rebalance our business, revitalise our brand and restore profitability.”

Thorntons has been one of the British retailers hardest hit by the economic downturn, as cash-strapped consumers sacrificed their sweet-toothed cravings in favour of more pressing needs.

Earlier this year, Thorntons reported a doubling of its losses to £2.2m in the 12 months to June 30, and axed its dividend, blaming difficult trading as the UK economy entered a double-dip recession.

Last December, Thorntons issued a profit warning that prompted a raft of long-term institutional investors to abandon the stock, and its shares have fallen from above 200p in 2007 to less than 10p earlier this year.

Thorntons’ market capitalisation is hovering at about £20m, well down from its peak of more than £135m five years ago.

The group has responded to dwindling footfall with its three-year strategic plan to slim down its presence on the high street from 360 own stores to as few as 180, keeping down costs by declining to renew leases as they expire.

Thorntons has instead targeted supermarket customers, and improved its online offerings to include items such as a box of chocolate truffles imprinted with a personalised message.

“Given the tough backdrop, management has sensibly adopted a cautious stance in peak trading plans. We are very positive on the strategy, and recent product innovations have been encouraging,” said Bethany Hocking at house broker Investec.

Thorntons shares rose 3.3 per cent to 31.5p on Wednesday.

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