- First half profits plunge 60%
- But CEO insists ‘real growth drivers’ are in ‘fine form’
- Chocolatier plans profitable growth return in FY24 and FY25
Shares in Hotel Chocolat (HOTC:AIM) cheapened 2.2% to 202.5p after the premium British chocolate maker reported a plunge in first half profits and warned it remains ‘cautious’ about consumer spending ahead of the seasonally important Mother’s Day, Easter, Eid and Father’s Day events.
The posh chocolates brand also provided a wide pre-tax profit guidance range of £4 million to £7 million for what is a transitional year to June 2023, with much hinging on its Easter sales performance amid the ongoing cost-of-living crisis.
H1 PROFITS SOUR 60%
For the half ended 25 December 2022, Hotel Chocolat’s underlying pre-tax profit plunged 60%, from £25.4 million to £10.2 million, as group revenue fell 9% to £129.8 million.
Despite delivering an outstanding Christmas, the company’s sales fell due to lower wholesale and digital revenues and with revenue impacted by the tough decision to change its international growth strategy.
In Japan, Hotel Chocolat has launched a new strategic partnership with Tokyo-based Eat Creator and in the US, the focus has pivoted to online direct-to-consumer and wholesale opportunities.
Co-founder and CEO Angus Thirlwell, who is pushing ahead with right-sizing the business and reining in costs, insisted ‘the real growth drivers of Hotel Chocolat’s future are in fine form’, with the brand resonating with consumers and the performance of retail stores, which account for 70% of UK sales, having ‘improved materially’ in all metrics since the pre-covid period.
Hotel Chocolat’s VIP customer base has increased to 2.75 million, up more than 150% since full year 2019.
SHARPENING THE MODEL
Commenting on the results, Thirlwell said the ‘strong sales performance’ from Hotel Chocolat stores, ‘underpinned by our scaled database, is a result of hefty investments we continue to make into our brand. Investing in more cacao and less sugar in our recipes, funding nature positive cacao farming and championing British-made quality and design flair.
‘Having grown sales by 66% since the start of the last pre-pandemic year, as previously announced, we are taking this year, over FY23, to sharpen-up our operating model before we embark on the next stage of growth.’
Thirlwell insisted Hotel Chocolat’s ‘adapted plan for international growth - to pursue the proven brand appeal with low risk-low capex operating models - is making sound progress.’
He added that following this transitional 2023, ‘in FY24 and FY25 we expect to see a return to sales and earnings before interest, tax, depreciation and amortisation (EBITDA) growth with a continued target of 20% EBITDA margin by FY25.’
