January 16, 2013 10:12 pm

Supermarkets help Thorntons cut losses

Brisk supermarket sales of chocolate boxes have helped Thorntons offset losses from its high street stores.

The company said sales grew by 5.4 per cent year on year to £88m in the 14 weeks to January 12, driven by a 26.4 per cent jump in commercial sales – made through third-party retailers such as supermarkets – to £34.7m.

That compensated for a quarterly fall in Thorntons’ own-store sales, which dropped by 9 per cent to £40.9m, led by a 1.3 per cent decline in like-for-like sales partly as a result of three store closures.

Jonathan Hart, chief executive, said he still envisaged a future for the company’s own-brand stores.

“We remain committed to the high street,” he said. “That means between 180-200 stores located in places where footfall is sustainable.”

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

However, franchise sales fell by £1.1m to £3m, while online business was down by £700,000 to £4.8m. One boon was international sales, which increased 69 per cent to £2.1m.

Mr Hart said Thorntons’ commercial sales would soon become the biggest part of its business.

“Over the next 18 months our commercial business will account for more than half our revenues – consumers want to shop at supermarkets and want to buy our brand,” he said. “We have 317 own-stores [currently] and we are in line to close 120 stores through to 2014.”

Thorntons has been hit hard by the consumer spending downturn. Last September it reported a doubling of its annual pre-tax losses to £2.2m and axed its dividend. That followed a profit warning in December 2011, which prompted a series of long-term institutional investors to abandon the stock.

Shares in Thorntons closed down 7 per cent at 42.25p. They have risen nearly 10 per cent over the past year.

FT Comment

Thorntons’ investors have long suffered from toothache and there are few signs the pain will end any time soon. A sales boost among sweet-toothed supermarket shoppers over Christmas is unsurprising, though Thorntons said its share of the chocolate box market grew to 12.1 per cent from 11.7 per cent. The bigger problem continues to be stores, with too many located on empty high streets. Mr Hart said 120 will go when lease agreements run out next year, cutting costs significantly and allowing for more investment in commercial and franchise businesses. Until then Thorntons’ shares, priced at 12 times estimated 2013 earnings, look expensive for what is a turnround in progress.

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