Hot weather melts hole in profits at Thorntons

NIGEL COPE

Thorntons, the upmarket chocolate manufacturer and retailer, yesterday blamed the hot summer and mild autumn for melting profits last year and simultaneously issued a fresh profits warning.

The company said its shop refurbishment programme would hit profits by almost pounds 1m this year and that other exceptional charges were possible. The Derbyshire-based group is now expected to only break even at the operating level in the second half of the year while operating profits for the full year will be "materially below" last year's pounds 10m.

Reporting half-year pre-tax profits down from pounds 9.6m to pounds 7.6m, new chief executive Roger Paffard said the performance was disappointing but that moves were in place to put the company on the right footing.

"Our current performance has not been good and we have to get that right. We have been too focused on manufacturing and have neglected the retailing. We have not been doing the simple things."

He demonstrated his faith in the company's recovery by buying 73,000 shares yesterday at a total cost of pounds 100,000. However, the company's shares fell 6p to 135p, just 10p above the 125p issue price when the company was floated in 1988.

Total retail sales in Thorntons' 510 shops, of which 240 are franchised, were up slightly from pounds 35.7m to pounds 37m. However, like-for-like sales fell by 9 per cent due to the summer heatwave and mild autumn. Christmas sales were stronger but did not make up the lost ground.

Mr Paffard said he is looking to relocate some stores to better sites though some shops may close altogether if they are not considered worth refurbishing.

He added that although the company had an upmarket, prestige image, some of its price points were quite low. "We haven't been communicating that to people," he said.

Redesigned stores have been outperforming the older format by 8 per cent in sale terms. Thorntons plans to complete the redesign over three years.

Group sales were 2.6 per cent higher at pounds 59m and the dividend is unchanged at 1.5p.