Thorntons share price slides as sales melted by supermarket woes

 
Lynsey Barber
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(Source: Flickr/Lee McCoy)

The figures

The latest figures from chocolate maker Thorntons were hard to digest for investors, sending shares down more than seven per cent in early trading.

Like-for-like sales in the first half of the year to 10 January were £128m - a fall of eight per cent.

Pre-tax profit fell 11 per cent to £6.5m, largely as a result woes in its commercial side.

Commercial sales - made through other retailers and not their own shops - fell 12.4 per cent to £54.7m, which the chocolatier said was driven by underperformance in two unnamed key accounts, which offset "good growth in many grocery, convenience and high street accounts".

Retail sales grew 2.2 per cent on a like-for-like basis, despite a legacy of shop closures and plans for another 20 closures this financial year.

International sales were more positive, up 19.9 per cent to £5.4m.

Why it's interesting

Falling sales led to a profit warning last year. Having addressed one issue - teething problems at a new centralised warehouse - a second may not be so easy to fix.

The chocolate shop has moved away from having its own retail stores into being stocked in other outlets. It experienced a big drop in orders from major buyers.

Christmas figures were encouraging, as they should be, but whether Thorntons can keep that momentum going and get orders on the books is the real question for investors.

The trials and tribulations of struggling supermarkets have had a knock-on effect on Thorntons.

Hanging over the retail sector as a whole is an ongoing question mark over the relationships between suppliers and major stores. Whether this additional scrutiny will be a boon for Thorntons by improving them, or a bust by straining those relationships further, remains to be seen.

What Thorntons said

Jonathan Hart, Thorntons' chief executive:

We report a mixed performance from our two divisions. Our retail division delivered further like for like sales growth as a result of actions we have taken to improve its performance. Our FMCG division, however, suffered from difficult trading conditions in its UK commercial sales channel. We responded quickly by controlling costs and production.

In short

While Thorntons isn't quite issuing another profit warning, it's not the most positive set of results for investors, with issues in commercial sales continuing into the second quarter. Supermarket troubles are unlikely to lift soon and this will continue to weigh on Thorntons too.

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