Thorntons saw its share price rise this morning (12 September) despite lower full-year profits as an improved second-half performance led to better-than-expected pre-tax earnings.
In the 53 weeks to the end of December, Thorntons saw a 54% drop in underlying profit to GBP2.5m (US$4m). Including exceptional items of GBP3.1m, pre-tax profit plunged to GBP0.9m from GBP4.3m last year. However, analysts were expecting Thorntons to just break even at the pre-tax level.
The company saw its net loss widen in the period to GBP898,000 from GBP253,000 last year.
Thorntons said its full-year performance was affected by “weak consumer demand caused by a decline in discretionary income, combined with structural problems in many of the UK’s high streets”. Promotional activity also remained high, Thorntons said, as shoppers sought value, particularly around Christmas. Thorntons said gross margins came under pressure during the year, falling to 44% from 46.2% in fiscal 2011.
Shares, however, were up 4.25% to 28.41 pence at 09:31 today as the company said it saw “the strongest second half performance recorded by the business for three years” as a result of “a good Easter” period.
Own-store like-for-like sales declined by 3.8% during the year. The company said its store closure programme is “on track”, with 36 stores closed during the financial year. Commercial sales, however, grew by 7.9% to GBP85m. In all, net sales dropped 0.5% to GBP217.1m.
Despite the “challenge” to profitability over the past year, chief executive Jonathan Hart said the actions the company has taken have “started to deliver benefits” during an “improved” second half.
“This last year was the first of our three-year plan to restore the company’s fortunes,” Hart said. However, he added: “We do not foresee the economic landscape improving in the near future. We have made our plans accordingly and believe that the actions we have taken and continue to take will deliver improvements to profitability. We therefore approach the coming year with cautious optimism,” Hart said.
As part of the continued rebalancing strategy, the company said it will continue to focus on growing sales to its commercial partners, reducing its own store estate and retail sales volumes to “levels that will produce sustainable long-term profits”.
For coverage of Thorntons’ conference call on the results this morning, click here.