High Street retailers may be enjoying a relatively profitable period at present due to the upturn in the economy, but this does not necessarily mean that their future successes are guaranteed. Factors such as changing consumer spending habits, high levels of competition and uncertainties over interest rates are all taking their toll on retailers – meaning that many, including chocolatier Thorntons, are implementing business rebalancing strategies designed to align their selling strategies to a new consumer environment.
Thorntons closed a total of 36 stores during the last financial year and has confirmed an intention to close a further 60 in the near future as leases expire within its network of High Street commercial properties. While this may defy the current trend for expansion within the retail industry, however, it is in fact a clever strategy designed to boost profits and continue to grow sales exponentially.
In the year to the 28th of June, the chocolatier’s sales rose by 0.7 per cent – a positive result given that the recession caused two and a half consecutive years of zero sales growth. Yet this growth was entirely due to the sales of fast moving consumer goods (FMCG) in supermarkets around the country, as the 7.9 per cent leap in these sales offset a retail sales dip of 5.6 per cent.
This means, then, that the sale of Thorntons chocolates to supermarkets now makes up around 46 per cent of the brand’s business, explaining the strategy for widespread store closures. Should this strategy remain on target, the retailer will slash its store portfolio from more than 360 outlets to only 180 or 200 by the end of the 2016 financial year.
Chief executive Jonathan Hart believes the current strategy is beginning to bear fruit, and insists that the programme of store closures will continue.
He says; “In line with previous periods, we saw no signs of improvement in consumer spending on the High Street during this quarter, which is our shortest and smallest quarter and accounts for around 10 per cent of full year sales.”
“We are on track with our store closure programme which is focused on delivering a sustainable retail estate and remain confident that our strategy is the right one.”
Although this set of results may seem gloomy at first glance, it is an early indication of the steps Thorntons is taking towards recovery. As well as the growth recorded in its FMCG division, the retailer increased sales in both its online and international businesses, the latter of which was buoyed by “very careful steps” being taken to grow sales in areas such as South Africa, the USA, Australia and the United Arab Emirates.
Conlumino consultant David Alexander outlined the difficulties facing Thorntons, saying; “Consumers are now accustomed to seeing Lindt bars, organic chocolate from Green & Blacks and, increasingly, chocolate from high end cocoa producers like Montezuma’s in their local convenience store, while the rise of the Hotel Chocolat chain is bringing gourmet confectionary to the High Street.”
“Against this backdrop, Thorntons has found itself occupying an uneasy middle ground between premium and mass market appeal.”
Do you think there is still a place for Thorntons on the High Street?
