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Shake-up puts Thorntons into the red

Thorntons, the family-controlled chocolate group, announced a pounds 22m restructuring yesterday that pushed the Derbyshire company pounds 14m into the red and will see its focus shift from manufacturing to retailing.

The changes are part of a "root and branch" review conducted by chief executive Roger Paffard, who joined in January.

Ninety new shops will open in the next three years, taking the total to 359. Mr Paffard says that only 143 of Thorntons' current shops are the right size and in the right location. These will be refurbished while 126 others will close and 216 others will be opened on more suitable sites.

The expansion is expected to create 550 full-time equivalent jobs .

New retail formats are being tested. Cafe Thorntons features a coffee bar at the front which sells pastries and ice-cream.

The "Sweet Factory" format includes a premium "pick 'n' mix" counter in addition to the usual Thorntons ranges. Three other new formats will also be tested.

"We're going too fast for it to be painless," Mr Paffard warned. "It is putting quite a bit of strain on the business and it may affect Christmas trading as so many of our staff will be new."

He said the restructuring was necessary to address several years of under- performance, which had seen erratic profits and falling market share. He blamed dated store designs, a "manufacturer's mentality" and labour- intensive practices in the shops.

Staff have spent too much time either on administrative tasks or in product preparation such as "chopping up toffee", Mr Paffard said.

Thorntons has already announced the sale of its Belgian subsidiary, Gartner Pralines and is also withdrawing from France. As announced in June, its five manufacturing facilities will be consolidated into two with the loss of 143 jobs.

Of the pounds 21.9m charges, pounds 8m is to cover the cost of withdrawing from the continental subsidiaries, pounds 10m for the retail restructure and pounds 3.4m for the rationalisation of the UK plants.

The company plans to increase capital expenditure from pounds 7m to pounds 17m a year for the next three years.

Pre-tax profits in the year to June were down sharply to pounds 8m from pounds 11m the pervious year. Trading in the first quarter has been strong with like- for-like sales 19 per cent ahead of the same period last year. Last year's sales were ravaged by the summer heatwave.

Thorntons shares jumped 11p to 178.5p.