British confectionery manufacturer Thorntons suffers as a hot Easter discourages consumers from their usual seasonal chocolate spree.
Thorntons, reported in The Manufacturer November 2010 as the favourite British chocolate brand and the owner of more than 50% of the market share for UK boxed confectionery, has issued a profit warning today as the hot weather over Easter prompted a 22.8% drop in chocolate sales compared with last year.
The drop in sales is particularly damaging for Thorntons given that the Easter period typically accounts for about a third of all store sales in the first quarter. The company has said it now expects pre-tax profits for the year to 25 June to drop from the £6.1m it reported in 2010 to around £3m-£4.5m. This will come as a severe blow to the Derbyshire-based manufacturer which had hoped 2011 would be a strong year in order to compensate for the disruption to sales caused by freezing weather last winter.
Although Thorntons has diversified its product range in recent years to serve broader customer demand and to avoid seasonal peaks and troughs in chocolate sales the company says that the contribution made to sales by more sun loving products, like ice-cream, were insufficient to offset the drop in its core business.
The overall financial position of the Thorntons group has been safeguarded to some extent by buoyant commercial sales, however, Jonathan Hart; Thorntons chief executive has said that: “The past quarter has been extremely challenging particularly in our own stores and for franchisees and we foresee this weakness in High Street footfall and spending continuing.”
Hart’s cautious outlook is unsurprising given that consumer spending continues to fall as disposable incomes drops to an estimated £780 per household, according to a recent investigation by Deloitte. The same investigation blamed government tax rises and higher commodity prices pushing up inflation for the increasingly pinched state of the consumer’s purse.
Shares in Thorntons fell 6.5% to 75p shortly after it announced its profit warning.