Thorntons plans further Store Closures despite Strong Sales Growth

Posted on 21 January, 2015 by Kirsten Kennedy

Although supermarkets continue to struggle against the rise of the discounters, certain specialist stores still find that they often lose consumers to the “all under one roof” principle. This has been especially true at chocolatier Throntons, as along with battling rivals such as Maison du Chocolat and Godiva, its decision to sell its produce through supermarkets including Tesco has come at the expense of its high street network.

Thorntons-plans-further-Store-Closures-despite-Strong-Sales-Growth

As a result, the chain has been forced to implement a turnaround programme which largely focuses upon closing poorly performing high street outlets. Since the end of 2013, Thorntons has closed a total of 36 stores, with 13 of these closures occurring between the end of June 2014 and the 10th of January this year, and executives have warned that further closures may be on the horizon.

Fortunately, it seems that this turnaround programme is finally beginning to bear fruit, as the 14 week period to the 11th of January saw like for like sales at its retail division – which includes both its own stores and franchised outlets – rise by 5 per cent year on year. Furthermore, the peak Christmas shopping period between the 1st and the 24th of December ushered in a like for like sales rise of 7.8 per cent when compared to the same period in 2013.

Unfortunately, though, the ongoing issues facing the big four had a knock-on effect at Thorntons, with its supermarket division posting a 10.5 per cent year on year drop in revenues. In part, this is due to the fact that supermarkets chose to cut their orders in the run up to Christmas, forcing Thorntons to issue a shock profits warning on the 23rd of December.

Chief executive Jonathan Hart says; “The retail division experienced strong like for like sales growth in the quarter with an outstanding Christmas season which highlights our shoppers’ appreciation of our brand, product offering and in store experience.

“We were disappointed that the continued growth anticipated in the UK commercial channel of our [supermarkets and international] division had not been delivered.

“The challenges we experienced within specific grocers accounted for the majority of the share decline.”

In the years before the recession Thorntons, like so many retailers, placed a heavy emphasis upon rapid expansion on the high street. However, this strategy has somewhat backfired in the current era as the cost of running so many stores often outweighs the benefits.

Yet as the Telegraph’s Questor editor John Ficenec points out, simply choosing to close loss making stores is not necessarily a direct path to financial resolution.

He says; “Exiting loss making stores is costly because of charges for the shop leases.

“In the last financial year ended June, the closure of 36 stores cost a total of £1.5 million in lease charges against pre-tax profits of £7.5 million.”

It seems that Thorntons has no choice but to continue to close stores, despite the high cost to the company. However, with the supermarkets division continuing to struggle, executives must split their attention or risk a further profits warning.




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