Top story

Costs arriving from the retrenchment of its international business send Hotel Chocolat to a annual loss of £8.7m despite strong sales growth in the UK as in-store revenues bounced back.

Overall group sales increased by 37% to £226m in the year to 26 June, with UK sales up by 35% and international growth of 126%.

In the UK the mix of sales shifted back towards retail stores and “encouragingly” the group is now seeing higher sales densities in stores than before the pandemic, with lower property costs.

During the period it upsized four locations and anticipates that in future more space growth will come from upsizes than from openings in new catchments.

Active customers increased by 15% to over 2 million, with frequency also rising by 14% as digital and partners continued to complement its retail estate by offering delivery.

International sales grew 126% but margins remained below internal expectations, leading to adjustment to the group’s international strategy and a prudent approach to capital allocation

As such, it withdrew from current direct-to-consumer activity in the US and fully wrotedown its Japanese joint venture, which entered civil rehabilitation protection in July 2022 and continues to trade. Discussions ongoing with potential new partnership based on a brand licensing model, Hotel Chocolat said.

Therefore the group fell to a “disappointing” £8.7m loss from a £5.5m profit last year reflective of the “significant” impacts of discontinuing activities amounting to £30.4m.

However, underlying profit before tax rose to £21.7m from £9.6m which represents “a pleasing result, evidencing the ongoing success of the core business”.

The group is currently approximately one third of the way through its trading year, with retail trading in line with last year and online and wholesale sales softer year-on-year.

It said it is adopting a deliberately prudent approach to the outlook on trading, manufacturing controlled levels of seasonal inventory with a strong focus on self-help actions to mitigate inflationary pressures.

A focus on “quality over quantity” will target reduced levels of discounting and higher mix of full-price sales, with reduced spend on lower margin online acquisition marketing.

CEO Angus Thirlwell commented: “Since [July] the performance of our retail stores continues to beat 2019 pre-covid levels and subscriptions are in growth too. We have reduced online marketing spend resulting in lower volume, but higher quality full-price sales. Our wholesale partners are also showing caution too.

“The Hotel Chocolat brand has huge resonance with shoppers and despite the macro-economic environment, people are still treating themselves with affordable luxury and remaining loyal and we are winning new customers who recognise our quality.

“It goes without saying that the current environment is challenging on multiple fronts. Over the last few months we have taken decisive steps to reduce risk and to fully pull all our self-help Ievers in both our manufacturing and retailing businesses. One thing is for sure, we will never compromise on the brand standards and values which have built our following to this point.

“We remain fiercely ambitious for the Hotel Chocolat brand for growth in both UK and international markets. Our new stores showcasing the format of the future opened in Norwich and Northampton and are trading very strongly. Internationally we intend to utilise more risk-contained techniques to capitalise on the proven brand appeal in major international markets. We will update on developments in due course.

“As we head into our busiest part of the year, I am confident that the strategic direction we have put in place will improve the prospects of the business for significant years to come. Our decisions to focus on full price sales and quality over quantity, coupled with a resurgence of physical store performance means that we anticipate December will be busier than ever.

Meanwhile, after seven years, Andrew Gerrie, has confirmed his intention to step down as chairman in 2023 in order to focus on growing commitments to his other business ventures.

Matt Pritchard will also be leaving the business in 2023 to pursue new opportunities following nine years as CFO.

Hotel Chocolat shares are up 2.1% so far this morning to 148p on the news.

Morning update

Springboard’s monthly footfall data show the gap to 2019 footfall levels widened in November to -11.1% from -9.8% in October.

The uplift in footfall compared to 2021 also diminished for the fourth consecutive month in October to be up just 4.3%, below a third of the uplift of 15.6% in July.

Black Friday provided retailers with a much needed boost at the end of November, with a 11.7% increase on Black Friday.

The uplift from 2021 in November across all UK retail destinations was 4.3% which, in the absence of Black Friday, would have been suppressed, most likely at just circa 2.5%. The gap from 2019 would also likely to have widened even further to down by around 14%.

Footfall in high streets was 5.6% higher than in 2021, 5% higher than 2021 in shopping centres and 0.7% higher than in 2021 in retail parks.

Footfall in shopping centres was 17.3% below 2019 in November, versus a 12.4% drop in high streets.

Diane Wehrle, marking and insights director at Springboard, said: “We are likely to see a lull in footfall over the forthcoming weeks, which is a pattern of activity recorded by Springboard post Black Friday in pre-Covid years.

“There is a six-day trading week in the lead up to Christmas Day this year, which suggests footfall in the week from Sunday 11 December will also be muted, as shoppers hold out until the last week to shop, in the hope of benefiting from last-minute discounts.”

On the markets this morning, the FTSE 100 is up 0.2% to 7,588.8pts.

Early risers include Parsley Box, up 23.1% to 6.4p, Ocado, up 8.2% to 673.4p and Kerry Group, up 4.6% to €91.94.

Fallers include Imperial Brands, down 1.4% to 2,095, Devro, down 1% to 303p and PayPoint, down 0.9% to 532.3p. 

Yesterday in the City

The FTSE 100 ended November closing up 0.8% to 7,573.1pts yesterday.

Risers included THG, up 7% to 67.9p, Just Eat Takeaway.com, up 3.1% to 1,864.2p, Kerry Group, up 2.4% to €87.88, Compass Group, up 2.3% to 1,872p and Hilton Food Group, up 1.3% to 541p.

Troubled Parsley Box bounced back 73.3% to 5.2p as it prepares to delist from the stock market.

The day’s fallers include Hotel Chocolat, ahead of this morning’s annual results, down 6.5% to 145p, C&C Group, down 4.1% to 174.7p, Bakkavor, down 3.4% to 91.8p, Tesco, down 2.4% to 227.5p, Premier Foods, down 2.1% to 104.4p and Marks & Spencer, down 1.6% to 120.6p.

 

Topics