Hotel Chocolat today reports a fall in sales over the Christmas period and in the first half of its financial year, despite strong in-store growth. The retailer plans to grow its UK store estate over the next three years, and says new format stores have performed strongly.
The multichannel chocolate retail brand says it is going through a transition period towards a previously set-out strategy of focusing on “quality over quantity”, working with fewer third-party retailers, moving away from discounting and taking a low-cost approach to international sales after closing its US business. As a result it aims to make profit margins of 20% in 2024/5.
The update comes as the Hotel Chocolat posts a trading update for the 26 weeks to December 25 2022, in which Hotel Chocolat group sales fell by 9% to £130m. Within UK and Ireland sales were down by 7%. In the nine weeks to the same date, group sales were 8% down on the previous year, and 9% down in the first half.
Sales grew strongly in its stores, on a like-for-like basis that strips out the effect of store openings and closures, over both the first half (+7%%) and the nine weeks to December 25 (+10% to £74m), and the retailer set a new Christmas in-store sales record. But online sales fell, both as shoppers returned to store, but also as marketing spend was cut back. Wholesale revenues were behind expectations as online partners managed their inventory cautiously and as the retailer works with fewer new partners as it focuses on quality over quantity.
It has reduced inventories by 17% as it moves away from discounting – with perishable inventories 35% lower and non-perishable inventories higher in order to boost availbility. By cutting perishable inventory it is less likely to have to sell at a discount. Today it says that the amount of chocolate that went into the Christmas sale was 80% lower than last year.
Angus Thirlwell, co-founder and chief executive of Hotel Chocolat, says: “A late festive surge delivered sparkling store performances. When times are tough, shoppers prioritise quality products that are really worth it. Hotel Chocolat will continue to live up to these expectations: investing in more cacao and less sugar, funding nature-positive cacao farming, and championing British-made quality.
“We have grown Hotel Chocolat by 65% over the period since the start of the pandemic, adapting to some of the most difficult economic conditions on record. Taking a year, over FY23, to sharpen-up our operating model is the right thing to do, before we embark on further pursuit of the multiple growth opportunities ahead for our brand.”
Compared to the first half of 2019, store sales were 25%, UK and Ireland and group sales were all 65% higher.
The retailer says it has £31m in cash as of January 18. It continues to trade in line with market expectations. It puts those expectations at revenues of £213m and underlying pre-tax profits of £8m In the year to June 25 2023.
Hotel Chocolat is ranked Top100 in RXUK Top500 research.