Shares of Hotel Chocolat are falling as the confectionery chain records another annual profit warning
- Earlier, Hotel Chocolat announced that it would break even this financial year
- For FY24, the group believes sales and earnings will exceed expectations
- The company saw digital and wholesale revenue declines over the past year
Hotel Chocolat Stocks slumped Friday after the group said it expects to make a loss in 2023 and post below projected profits the following year.
After warning in April that underlying pre-tax earnings for the current fiscal year would break even, the confectionery is now forecasting a modest loss due to the effects of cost-cutting materializing later than anticipated.
The Hertfordshire-based company said markets are currently forecasting £201.8 million in revenue and underlying pre-tax profit of around £300,000.
Hotel Chocolat posted a £3 million hit by closing all five of its US stores and writing off a further £23 million from a business venture in Japan
For the next 12 months, the company expects sales and earnings to be below expectations due to weak consumer confidence and inflationary pressures.
Following the announcement, shares of Hotel Chocolat plummeted 17.3 percent to 115p, one of the five worst-performing companies on the AIM All-Share Index and more than three-quarters below their peak of 540p in November 2021.
“As previously announced, FY23 is a year of transition to reshape the company and prepare it for the next phase of growth,” Hotel Chocolat said in a statement.
“While excellent progress has been made in terms of cost savings, these are being delivered later in the year than originally anticipated.”
Hotel Chocolat’s sales soared during the lockdown period, despite the temporary closure of the group’s stores as Britons heading home sought to treat themselves, their families and friends.
It has since struggled with a slowdown in trading over the past year due to declining digital and wholesale revenues and weaker demand during the Easter holiday, the latter partly due to difficulties in stocking enough products.
The company was additionally hit by issues in its overseas business, with sales hit by heavy Covid-related restrictions in Japan and supply chain issues in North America.
When its Japanese joint venture partner offered an updated loan financing proposal, Hotel Chocolat halted all further investment in the project due to uncertainty about possible future Covid-19 restrictions.
Subsequently, a restructuring process was initiated with the aim of finding alternative financing arrangements, creating a £22 million impairment provision for the company.
Still, the company entered into a new strategic partnership with Tokyo-based Eat Creator Corporation in January under which it will earn royalty income by allowing its name to appear on 21 stores.
When the deal was announced, Hotel Chocolat CEO and Founder Angus Thirlwell said: “Our new partner is well equipped to maximize the brand’s potential for Japan, with proven expertise, fresh capital and a natural alignment with brand values.”