UK chocolate firm Thorntons has said it believes it can create a “viable” and “sustainable” store estate despite sales from the outlets declining for the fifth straight financial year.
Two years ago, Thorntons announced plans close up to 180 stores as part of plans to revitalise that side of the business, which had seen its stores suffer during the downturn.
The company, which also sells chocolates through supermarkets and online, returned to the black in the 12 months to 29 June. Those channels helped company revenue increase 1.8%. However, sales from its own stores fell 8%. The closures did hit store revenues but like-for-like sales were still down 0.8%.
Speaking after the results were announced, CEO Jonathan Hart conceded the group still has “more work to do” on the performance from its stores.
Nonetheless, Hart said Thorntons saw a “small growth” in sales from its stores in the second half of the year and told just-food the group is “working hard” to improve in a number of areas including merchandising, “the customer experience” and “taking learnings” from its new store concepts to boost sales.
“I certainly believe we’re on track to create a very viable and sustainable estate long term but we still have more work to do, particularly in reshaping our estate with further store closures in the year ahead.”
Conlumino analysts described the like-for-like sales as “anaemic” but said there are “encouraging signs that things are stabilising”.
Hart said “pockets of growth” seen through each of the spring seasons are “contributing to the improving trend” Thorntons has seen across its store network.
“I regard the performance over the last year as a more stabilised performance,” Hart said. “We clearly have more work to do but in the overall review of the business I’m encouraged by where we are and I think we’ve built a platform for our retail business to further develop as well as well as providing strength to our growth in our other channels.”
Thorntons closed 35 stores during the last financial year and is working to a portfolio of 180-200 stores.
“We are making good progress in reducing our own-store estate towards a sustainable level for the longer term. Our store closure programme is on track and our plan is to retain a sizeable store portfolio … demonstrating our continued commitment to the high street where we can offer a different and personalised customer experience.”
Hart said the group had made “significant progress” towards restoring overall profitability during the year, with a focus on improving margins and controlling costs.
Thorntons recorded a net profit of GBP4.2m in the 12 months ended 29 June, compared to a net loss of GBP898,000 a year earlier. EBIT margin was up at 3.3% from 1.3% last year.
Hart added: “Although we have some way to go to restoring margins to industry average, we have clear plans in place to continue this improvement and are confident in doing so.”
The CEO said the opportunities for Thorntons to grow its business remain “significant”.
As well as refitting stores, Thorntons is working on a product revamp and rebrand across its portfolio. This will see the introduction of a “new visual identity” and a “fresher” colour palette, as well as the introduction of five new ‘categories’, which will include product launches over the next year.
“We are pleased with the continued strength of the Thorntons brand and plans are in place to extend our transformation beyond the three year strategic horizon, adding top line sales growth as we continue to rebalance the business,” he said.
“Over the past 18 months we’ve established progressive recovery and positive momentum. This is not a job done but a platform upon which for us to build.”
With one more year of Thorntons’ “rebalance strategy” still to run, Investec analyst Nicola Mallard believes the group is “stronger” and looking beyond this “recovery period” with an aim to continue to drive both the top line and profits.
“The group is laying down the drivers to deliver continued top line/profit momentum. In light of the beat today, we upgrade our PBT forecast for the current year by GBP0.4m to GBP7.2m.”
Nevertheless, Thorntons’ share price was down 2.7% to 87.59 pence at 15:04 BST today.