Shares in chocolate retailer Thorntons opened almost two per cent higher after it posted figures showing like-for-like retail sales went up by five per cent in the second quarter of 2014 – a turnaround from the 3.7 per cent decline in its first quarter.
In the 14 weeks to 10 January, the company's high street stores brought in £44.9m, with international sales increasing 19 per cent.
However, those retail figures – ie. sales through its shops – were in contrast negative commercial figures, which represent sales through grocers. At the end of last year, these were so bad the company had to issue a profit warning, causing shares to slump by 25 per cent.
Why it's interesting
Christmas should be a positive time for a chocolate retailer, which meant last month's results were very concerning for investors.
At the time, Thorntons identified two main problems holding it back. The first was a big reduction in anticipated orders from major buyers. It said it had also experienced problems at its new centralised warehouse. Because of that, Thorntons' commercial channel suffered "lost and late sales" and, as a consequence, lost out on "promotional slots and reorders". The blow was all the more painful as the company had carried out significant testing on the facility before it opened.
This was a continuation of a difficult few years for the chocolate maker – in 2013, it shut 39 stores and started to focus on selling its products through supermarkets as part of a new recovery strategy. This was going well for a while, but the latest figures indicate shop sales are now more popular among consumers.
Today's much-improved retail results reflect shopper demand for Thorntons' inlaid boxes, seasonal specialities and advent calendars, culminating in a 7.8 per cent increase in like-for-like sales during December specifically.
What Thorntons said
Chief Executive Jonathan Hart said he was confident about the company's UK strategy despite its poor commercial results:
Alongside very positive results from our retail division for the second year running, we were disappointed that the continued growth we anticipated in the UK commercial channel of our fast-moving consumer goods (FMCG) division had not been delivered. The challenges we experienced within specific grocers accounted for the majority of the share decline.Good growth in many of our grocery, convenience and high street accounts and a strong performance from our retail division gives us confidence in shopper demand for our brand and products. We continue with our transformation towards an FMCG business and the investment in our people, systems and factory is ongoing. We have good plans for the spring seasons and the Board remains confident in its multi-channel strategy and ongoing transformation.
Thorntons has been through a testing 12 months, with shares falling to around half the value they were at in January 2014.
A noticeable fall took place in December following the release of its profit warning, and a gradual decline has continued since then. But despite that hiccup at its new warehouse, today's figures provide encouragement to those investors who have held on.