Christmas drives Hotel Chocolat H1 2018 sales up 15%

Meanwhile, the underlying EBITDA was up 15% to £15.8m ($21m) and profit after taxes increased by 15% reaching £10.1m ($14m) during the period, said Hotel Chocolat.

Co-founder and CEO of the company, Angus Thirlwell, said the Christmas season was the main driver of Hotel Chocolat’s growth.

“There has been another period of strong progress for Hotel Chocolat with growth in both sales and profits,”​ he said. “The critical Christmas period was again successful, helped by further improvements in availability, our best ever seasonal range and the extension of our one-stop gift solutions range.”​

In December 2017, Hotel Chocolat also introduced a range cocoa beauty products, “Barbot 1745,”​ inspired by its Saint Lucian cocoa plantation and rainforest spa across its retail locations.

H2 sales supported by spring holidays

Hotel Chocolat also has several products in its development pipeline for the “key spring seasons of Mother’s Day and Easter,”​ according to Thirlwell.

“Recent trading, including the Valentine’s period is in line with the board’s expectations,” ​he said. “We are confident of further progress during the year.” ​

However, analysts from Liberum warned that there are risks usually around spring seasons, such as weather, that could affect sales, “impacting both volumes and margins.”​

Some important calendar events (Easter, Mother’s Day and Valentine’s Day) in H2 account for a “significant portion”​ of the period sales, said analysts. “… That said, we note this year’s relatively early Easter and faster run rate of store openings should support forecast confidence.”​

New stores and factory capacity increase

Hotel Chocolat opened 10 new stores during the period, including nine in the UK and its first one in the Republic of Ireland, contributing 5% to the group’s sales growth.

New sites featured café drinks and are in a wide diversity of locations including city centers, market towns, retail parks, designer outlets, according to the company.

It is also expanding in other international territories by trading from four locations through a Hong Kong franchise partner.

Fiona Cincotta, senior market analyst at City Index, pointed out that, even though the lower pound exchange rate made key ingredients like cocoa more expensive to buy, Hotel Chocolat’s “margins are holding together”.​

“Previous investments in factory capacity are bearing fruit here, providing the scale necessary to offset higher input costs,”​ she said.

Hotel Chocolat’s factory capacity increased by 25% during the reported period.

E-commerce growth

In addition to opening more stores and increasing production capacity, Hotel Chocolat’s digital capability was also making “good progress,”​ said Thirlwell.

The company’s overall digital sales grew by 13% during H1, 2018, with revenues from its own website and third party wholesale to digital retailers including Amazon and Ocado increasing by 16% and 7% respectively.

Mobile conversion rate, on the other hand, rose from 2.6% in H1 2017 to 3.1% in H1 2018.

Hotel Chocolat is finalizing its next set of capacity and capability investment in order to meet its growth targets and improve efficiency in the years ahead.