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Hotel Chocolat keeps faith with stores, after six months of sales growth across channels

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Other retailers may be closing stores as shoppers buy more online, but Hotel Chocolat says it believes there are attractive opportunities to open more – and make it easier for customers to access its brand. In the last half-year, it says, sales have grown across all its channels, from stores to digital and wholesale. 

During the six months to December 30, the chocolate manufacturer and retailer opened new stores in the UK, Ireland, New York and Tokyo, launched a B2B website and saw half a million customers sign up to its new VIP Me loyalty card.

Hotel Chocolat said it had modelled three scenarios for sales and external costs, and found that even if sales fell and costs increased faster compared to 2018, its existing retail estate would still be profitable in five years’ time. It sees “attractive opportunities” for more store openings, which it will approach on a site-by-site basis.

However, its strategy is to increase sales through product innovation, through deepening its relationship with customers through its VIP Me card, and empowering store teams. At the same time, it will focus on buying better, innovating in processes and working smarter. It said it would take a cautious ‘test, learn and grow’ approach to openings in its new Japanese and US markets.

The update came as the retailer reported revenue of £80.7m over the half-year. That was up by 13% on the same time last year, while pre-tax profits of £13.8m were 7% up on the £12.9m reported at the same time last year. Discounting the start-up costs of its New York and Tokyo openings, pre-tax profits came in 11% ahead, at £14.4m. 

The retailer said that its sales had grown across retail, digital and wholesale channels: digital sales, including its wholesale website, were up by 22% on the same time last year. During the year 14 new stores opened in UK and Eire, adding 4% to sales growth, and the retailer also opened its first stores in New York and, with a join venture partner, in Tokyo. Digital sales grew both through its consumer website and through its new wholesale website for digital retailers. 

Sales of Hotel Chocolat’s in-home Velvetiser hot chocolate maker were six times ahead of expectations, although the company said that the fact that it was made by a third-party, and the launch of its VIP Me loyalty scheme with customer benefits including discounts and sign-up incentives had combined to reduce gross margins by 200 basis points (bp), part of a 270bp decline to 65.8% from 68.5% last time. 

Angus Thirlwell, co-founder and chief executive of Hotel Chocolat, said: “This has been another period of progress for Hotel Chocolat with strong growth in sales, profits and cash generation. The critical Christmas period was again successful, supported by the launch of our new and innovative Velvetiser Hot Chocolate maker, and by a deepening relationship with our customers via the new VIP Me scheme. Both developments will also support our plans for the key spring seasons of Mother’s Day and Easter. 

“Growth in the UK continued to deliver improvements in profitability which have enabled us to invest int he launch of two new start-ups in New York and Tokyo, both of which are showing encouraging early signs, in terms of customer response and the initial store sales performance.”

He said Valentine’s Day trading had met expectations. “We continue to make good progress against our key strategic objectives of opening more stores, improving our digital capability and increasing our production capacity whilst testing and learning in two large new territories,” said Thirlwell. 

Image courtesy of Hotel Chocolat

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