If there's one brand that has benefited from the old 'lipstick effect', it's Thorntons. The global downturn and falling levels of real pay in the UK have hit consumers hard, but while they can no longer 'say it' with diamonds or lavish gifts, they can still afford to say it with chocolate.
The triple whammy of Easter, Mother's Day and Valentine's Day drove up Thorntons' revenues in the first 14 weeks of 2013 by 4%. Total sales hit £60.6m across the period to 20 April, boosted by a 10% rise in sales through the supermarkets and other retailers. Third party sales now account for nearly half Thorntons' business and overtook own-store sales this year for the first time.
According to data from market analysts at Nielsen, these new revenue streams have increased Thorntons' market share in the boxed chocolate market from 11.7% to 12.2%. Although, of course, there has been a resultant dip in own-store sales, which fell 4.1% to £26m in the last three months.
It looks like CEO Jonathan Hart has landed on a winner with his 'slash and burn' strategy. He has already offloaded a number of Thorntons' poorly performing high street stores, ditching those with cripplingly high rents and massive overheads. Nine were closed in the last quarter alone. But more store closures over the coming year will see the high street brand trading from just 180 stores, down from 400.
Thorntons has also managed to turn around its online business. Its highly-anticipated website relaunch failed to materialise before Christmas, resulting in millions of lost revenue. But the new e-commerce site is finally now up and running. Online sales have grown 4.6% to £2.2m in the last quarter alone.
This turnaround can be likened to the return of the fictional Willy Wonka after his business waned in the famous Roald Dahl tale. Indeed, a recovery seemed just about as unlikely as the existence of Oompa Loompas a year ago when Thorntons' released a series of profit warnings. But now, revenues are up and Hart is even increasing the firm's profit forecasts for the full-year.
'As a result of actions taken over the past two years gross margins were slightly ahead of our expectations,' Hart says with his characteristic reserve. 'Although we continue to be cautious about the impact of current economic conditions, the board is now confident that pre-exceptional profit before tax for the full year to June 29 2013 will be substantially ahead of the current market expectation with the potential for further improvement in the final quarter.'
Thorntons shares closed at a two year high of 80p, up 4.25p, or 5.6% today.