Total group sales climbed by 6.3% over the period, compared with growth of 2.1% in the first quarter. FMCG sales were up by 17.1%, while total retail sales fell by 2.9%, which reflected planned closures.
City analyst N+1 Singer described the trading update as “excellent”. The result was driven by particularly good success in the UK commercial sector, where sales climbed by 21.1%. “They had an excellent season in specialities and broadened their customer network and helped, in part, by certain private label orders having fallen in this period rather than the end of the first quarter,” said analyst Matthew McEachran.
International commercial sales
While international commercial sales fell by 15.5%, they were still ahead for the first half as a whole. McEachran attributed this to orders not being repeated in Australia rather than a widespread problem.
Retail like-for-like sales up by 3.5%, with direct sales were up 27% compared with last year’s “weak” comparable sales, as “all aspects of the web business performed strongly”, he added.
“This is an excellent performance over the all-important Q2 [second quarter] period (which is almost twice the size of other quarters) and, with management having resisted the temptation to discount, margins are in line with expectations,” said McEachran.
Management was successfully implementing an ambitious plan to transform Thorntons “from a tired UK retailer into an international FMCG business with a right-sized multi-channel UK retail core”, he said. Progress towards that change was encouraging, with an improved core proposition, covering product, pricing and packaging, in-store displays and marketing, he added.
N+1 Singer issued a ‘buy’ recommendation on Thorntons’ stock.
‘Outstrip the managed retail decline’
Nicola Mallard, analyst with Investec, repeated her ‘buy’ advice on the firm’s stock, noting the group’s FMCG sales growth continued to “comfortably outstrip the managed retail decline …”.
Mallard predicted half year revenue growth of 4.8%, with higher growth in earnings before interest and tax.
Thorntons’ chief executive Jonathan Hart said the results demonstrated continued good progress in the transformation of the business.
“As expected, economic conditions remain challenging for many of our customers and the market overall was very competitive,” said Hart.
“These results are further positive evidence of the actions we have taken over the past two and a half years to rebalance our business and revitalise our great brand. We are confident in our plans for the key spring seasons, in particular Easter. Our current outlook for the financial year remains in line with market expectations.”
Meanwhile, chairman of Thorntons Paul Wilkinson will be chairing Food Manufacture’s Business Leaders’ Forum on Tuesday, January 21 in central London. Watch out for full news and video reports from this event next week.