The retail industry has experienced a significant boost during the current heatwave, with DIY stores, garden centres and supermarkets particularly enjoying their moment in the sun. However, the hot weather has not yielded hugely positive results for all retailers, with chocolatier Thorntons in particular having to put measures in place to ensure an ongoing survival on the high street.
The retailer previously blamed the sunny conditions for a string of profit warnings which have plagued results in recent months as, after all, consumers do not tend to purchase products which have a high chance of melting during a heatwave. Yet due to the fact that its financial year ended on the 29th June it remained somewhat sheltered from a noticeable negative impact – a factor which has allowed Thorntons to post results which fell just ahead of previous forecasts by City analysts.
For the year to June 29th, Thorntons posted pre-tax profits of £5.2 million according to forecasts released this week by Investec, comparing favourably to the 2011-2012 financial year when the retailer only achieved a total of £900,000. This was greatly aided by a 5.6 per cent sales boost in the final quarter.
Furthermore, the poorly performing high street commercial property division saw a 0.5 per cent sales rise, although this was marred by a 3.8 per cent total sales drop thanks to the closure of a number of unprofitable stores. This strategy is set to continue, with chief executive Jonathan Hart voicing his intention to cut the store portfolio from the current 296 to between 180 and 200.
In order to make up for this loss of property footprint, Thorntons intends to focus more on its commercial division, which sees the retailer sell products through deals with UK supermarkets. This aspect of the business proved to be the most effective in terms of sales by a long way, with an 11.8 per cent sales growth meaning that the commercial division now accounts for 40 per cent of all business conducted by the chain.
According to retail expert Nick Bubb, this marketing technique could well be the answer to the turnaround hopes of Thorntons.
He says; “It’s a good job that Thorntons’ financial year ran to June 29, as the hot weather ever since then will not have helped chocolate and fudge sales, even if some shops also sell ice cream now.
“Still, the strategy of pushing ‘commercial’ sales to supermarkets etc and shrinking the retail exposure seems to be working, with Thorntons confirming today that the year just ended saw a better than expected profit income.”
With supermarkets becoming something of a cornerstone in the retail industry, and increasing numbers of retailers turning to the online market in order to achieve sales targets, Thorntons is by no means the only chain cutting back on its high street presence. However, while this profits rise may be good news for Thorntons, it is as the result of yet another blow to the town centres of the UK.
Do you think more retailers should adopt Thorntons’ method of focusing on commercial sales, or will improving digital platforms prove to be the real game winner in the retail sector?
Previous Post
One in Seven Properties in Business Rates Arrears
