Rent reductions way out for Thortons: analyst

The poor trading performance meant pre-tax profit for the year before exceptionals would be lower than the £7.5m it expected in April.

Own-store sales have continued to fall and its wholesale business missed expectations, with Thorntons having to clear stock by discounting, proving a trigger for the decision by chief executive Mike Davies, formerly of Mars, to retire and point towards a successor with more retail experience.

Supermarket sales of Thorntons’ products, a move initiated by Davis, have been denting the independent chocolate maker’s own-shop higher margin sales.

Indeed, supermarket sales now contribute more than a third of revenue having risen by 38.5 per cent in the first three quarters of Thorntons’ financial year.

And according to analyst Andrew Wade from Numis Securities, Thorntons is obliged to continue its presence in supermarkets along with the other leading brands, as it generates some €70m of turnover for the UK’s last independent chocolate maker.

He told ConfectioneryNews.com that Thorntons, which he stressed has a large fixed cost base, can extract significant savings by ensuring that the new management renegotiate the leases on its 600 high street outlets when they come up for renewal.

“In this tough trading climate landlords are under pressure to retain tenants and can be pressed for rent reductions. Such a move could produce savings of up to 50 per cent over the next five years,”​ added Wade.

Thorntons said that Davies will remain in place until a suitable successor has been identified.

Wade pointed out that, while perhaps the CEO’s skills were not adapted to managing a large retail estate of outlets, Davies’ chocolate manufacturing insight helped increase volume at the factory end, and he also brought a great deal of product innovation and brand focus to Thorntons.

Industry insiders claim he boosted Thorntons' appeal with the younger consumer, by switching from boxes to bags.