Thorntons issues profit warning as sales melt

The chocolate retailer says it'll just break even during this financial year. Presumably it hasn't had a good festive period, then...

by Emma Haslett
Last Updated: 06 Nov 2012
Oh dear, looks like Thorntons isn't going to have a particularly sweet Christmas. The chocolate retailer has just issued a profit warning, saying it only expects to break even when it posts its annual results in June 2012. For a company that should, by rights, be trading at its peak over the festive season, that's very bad news indeed. But Thorntons reckons it's nothing to do with bad management, and is all down to circumstances beyond its influence. No wonder shares are down by just under a third...

At 70 words long, the warning didn't go into much detail, but the company blamed weak consumer confidence and 'heavy promotions' - ie. when sales were low, it started slashing prices, which may have brought in customers but have clearly put its margins in a situation stickier than a bag of Special Toffee. That break-even figure also excludes what Thorntons likes to refer to as 'onerous leasing charges', or the fact that it still has to pay leases for some of its closed stores. Which it understandably isn't happy about.

To be fair to the company, breaking even is much better than the pre-tax loss of £1.1m it made in the year to the end of this June (although that's in comparison to a profit of £6.1m during the previous year). But presumably it's going to keep going with its strategy of moving away from the high street and into supermarkets and online, closing 180 shops over three years in the process.

Now of course, we know Thornton's isn't the only high street retailer whose sales are softer than an advent calendar on a radiator. But the chocolatier is one of the worst affected retailers on the high street, feeling the squeeze through 2010, when there were still signs of recovery. So this might have less to do with consumer behaviour than the fact that the model is, well, a bit outdated. Let's hope those rescue plans work out.

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Upcoming Events

Subscribe

Get your essential reading delivered. Subscribe to Management Today