In Focus: Melting moments

4th Jul 2011 Midlands

In Focus: Melting moments

Could Thorntons' decline lead to a takeover bid? Sam Metcalf investigates.

The news that Thorntons is looking at closing 180 of its high street stores marks a new low in a turbulent few years for the Alfreton-based chocolatier.

However, it comes as no real surprise when you consider that over the years, Thorntons has become a mid-range player, usurped by the likes of Hotel Chocolat which is now seen as a more 'aspirational' product. If anything, Thorntons has been the victim of over exposure and an over-zealous franchising exercise which has devalued what was once seen as a luxury product.

When I was growing up, you used to dream of being allowed to go and buy some Thorntons chocolate. Now, you can get it just about anywhere.

I suppose the writing was on the wall when Thorntons had a disastrous Easter this year– a period which should be its busiest. Thorntons blamed "hot weather" for a revenue drop of 0.7 per cent to £64.2m for the 16 weeks to 30 April 2011.

For the year to date, total sales increased by 2.9 per cent - helped by a 25.1 per cent rise to £27.7m in commercial sales. The company said more than 98 per cent of these sales were Thorntons' branded products.

However, own store sales declined by 13.9 per cent to £31.4m with a like-for-like sales decline of 12.6 per cent.

Tellingly, franchise sales decreased by 21.4 per cent to £2.7m over the period. Thorntons Direct sales also decreased by 7.9 per cent to £2.4m.

The vultures will be circling on the back of results like that, and Thorntons is ripe for a takeover.

In 2007 I interviewed Thorntons chief executive Simon Davies, who left the company last year.

Back then, he said: "I don't think it was a secret that the company had been subject to attempted buyouts and we needed to brush that aside and steady the ship, consolidate and build for the future. We have a clear goal: to build the business and increase shareholder value.

"There's a great future for this business - I'm convinced. It's our centenary in four years. That really will be an exciting time, we're all looking forward to it and by that time I fully expect us to be back at the top of the pile again."

That centenary is this year, and although it’s easy to pick out quotes and make them look silly, Thorntons is a long way from the top of the pile. However, whilst Davies’s words are hardly prophetic, Thorntons could be the subject of a hostile takeover bid again if results don’t improve quickly. Watch this space.

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