Shares in premium British chocolatier Hotel Chocolat (HOTC:AIM) sweetened 2.5p to 332.5p on the welcome news the company has increased its banking facilities to help get it through the coronavirus crisis.
The posh chocolates brand conceded the closure of retail stores had a material impact on trading during the crucial Easter period.
Thankfully however, ravenous online appetite for the brand helped to cushion the impact, as consumers treated themselves to chocolates during lockdown and logged on to order products for loved ones they couldn’t see in person.
EXTRA HEADROOM REASSURES
In today’s update, Hotel Chocolat said it had agreed a £35m revolving credit facility (RCF) with Lloyds Bank (LLOY), replacing a £10m overdraft and a new facility that follows on from a £22m placing in March to fund growth investment and provide operational headroom.
There are two separate tranches to the RCF; a £25m facility and a £10m facility. So long as the £25m facility remains in place, Hotel Chocolat is prohibited from paying dividends.
PALATE-PLEASING ONLINE SALES
On 23 March, Hotel Chocolat shuttered all its brick and mortar stores in line with the UK lockdown. Obviously, this had a material impact on trading over Easter, the second largest seasonal peak for the business.
Encouragingly though, this was partially mitigated by strong online sales with demand for the Hotel Chocolat brand, priced as an affordable luxury, remaining robust.
Every day at Easter, the online demand exceeded the quantity of orders Hotel Chocolat could accept due to safe working requirements and the short adjustment period, while wholesale partners Amazon and John Lewis also saw strong trading as the coronavirus outbreak accelerated the online channel shift.
‘BUILT FOR AGILITY’
The company’s passionate co-founder and chief executive Angus Thirlwell (pictured below) insisted: ‘Hotel Chocolat is a strong brand with differentiated products, a loyal customer base, and a vertically integrated direct-to-consumer business model, built for agility.
‘It is a reflection of these attributes that we have been able to add additional banking cover to the over-subscribed equity placement in March’, financial headroom that gives the company greater resilience against ongoing disruption.
Thirwell added: ‘Our market leadership in digital and subscription chocolate is more valuable than ever and we will accelerate the planned innovations and investments behind these models. Plans are in progress to re-open our physical locations when appropriate, with adjustments in place to make shopping with us safe and pleasurable again.’
THE LIBERUM VIEW
In a note headed ‘Resilience in a COVID-19 world’, Liberum Capital said: ‘Closing every store three weeks before Easter is far from ideal, especially for a chocolate business. The fact online sales rose immediately and to such a degree demonstrates the brand’s strength and operational agility.’
The broker estimates that ‘over half of “lost store” sales have been clawed back - quite a result in such short order. Additional bank support means the group is well capitalised.’
