With supermarkets in all out war over who can cut prices fastest and furthest, it’s not a good time to be a grocery supplier. Today the chocolate maker Thorntons said its sales had dipped more than 8% in its first half to £128.2m, largely because two ‘major grocery accounts’ had unexpectedly cut back on orders.
That helped push pre-tax profits down 9.7% to £6.5m. This follows a profit warning in December that knocked as much as 25% off the chocolatier’s market cap. At a time when supermarkets are focusing on developing their own-brand ranges it looks like there is less room for premium branded choccies.
Thorntons chief exec Jonathan Hart conceded that the company’s commercial arm suffered from ‘difficult trading conditions'. He said, 'We have taken the first steps in a programme to improve the effectiveness and efficiency of the core business, restructuring our executive team and business functions in order to create an organisation that will win in FMCG.’
On the plus side for Thorntons, its own retail business is doing ok – like-for like sales were up 2.2%, with a 7.8% boost over Christmas, although total sales declined 5.2% to £65.5m. It said it plans to close 20 of its 247 stores this year and possibly more in the future, as it moves to create a more ‘flexible and sustainable estate’.
There’s sign of some flexibility and innovation though. Over Christmas it rolled out 35 temporary kiosks in shopping centres to take advantage of the extra demand without boosting costs too much. Perhaps this could be replicated over Easter and on Valentine’s Days, especially as its number of permanent stores falls.
The future looks bittersweet for Thorntons. Supermarkets show no sign of relenting in their drive to cut costs and most high street shops are at risk of further disruption. But online sales are up 11.4% to £4.5m and the company insists it's well-placed to take advantage (if and) when consumers begin to up their spending again.