Profits rise at Hotel Chocolat as global expansion continues

Revenue rose 14% to £132.5m, the company said, while pre-tax profit climbed 11% to £14.1m, when it announced its preliminary results for the 52 weeks ended 30 June 2019.

Angus Thirlwell, co-founder and CEO of Hotel Chocolat, said: “I am pleased to report another year of significant progress for the Group with profits growing slightly ahead of expectations. In the UK, our physical locations performed well, reflecting their allure and relevance. ​

"Growth was underpinned by the combination of leisure, gifts and experiences including Chocolate Lock-in tastings, as well as new ranges of drinks and chocolate-dipped ice lollies. The launch of the innovative Velvetiser, our in-home hot chocolate system, supported strong sales growth and received fantastic customer reviews. Our new VIP ME loyalty scheme attracted over 900,000 active members during the period and we continued to bring new and exciting products to market​.”

While high street sales continue to fall and shops closing at their fastest pace since August 2008, leaving retailers’ confidence “crumbling”​, according to the CBI, Hotel Chocolat continues to thrive and has plans to open more outlets in the UK and abroad.

Focus on USA and Japan

“Profit from existing Group operations increased faster than sales growth, enabling us to invest in new markets. We are confident that our international expansion will continue to develop well. Our focus on USA and Japan, two of the three largest economies in the world, led to four locations opening, with a further five opening over the next six months. The brand, what it stands for, and our ‘More Cacao Less Sugar’ taste have proven attractive in Tokyo and New York, as well as our refreshing price versus quality ratio​,” said Thirlwell.

Steve Miley, a senior market analyst at asktraders.com​, said: “The company is in the great position to further grow by implementing its mutli-channel strategy, focusing on delivering a great product whilst maintaining its ethical standards. Over the next year the company plans to continue the expansion in the US, Japan and Scandinavia alongside domestic UK growth, but recognises potential headwinds generated by the economic uncertainty​.”

He told ConfectioneryNews the premium British chocolatier has managed to grow in a world dominated by well-established Swiss and Belgian premium brands. “With the company revenue already above market hopes, the company expectation over the next year is for a further double digit growth. With less than 2% market share of the £6bn UK chocolate market, Hotel Chocolat will continue the strategy of opening new stores in conjunction with increased revenue coming from the digital space. Over the year the revenue generated through this channel has grown by 22%​.”

Senior market analyst Fiona Cincotta at cityindex.co.uk​, said: "Hotel Chocolat has served up another impressive result as it continues to appeal to well-heeled shoppers, who are that little bit less susceptible to Brexit-related economic uncertainty than your average Brit​.”

Freight costs

She told ConfectioneryNews that investors will be watching the overseas operations very closely, given that Hotel Chocolate had to beat a retreat from the US in 2014 after it was unable absorb high freight costs.“Freight costs have fallen since the company's last US foray but question marks remain over whether it can ship its product overseas cheaply enough to generate the kind of plumb margins it's enjoying the UK​."

She said the big driver of Hotel Chocolat's future growth will be overseas, “but we're yet to see enough evidence that the new outlets in New York, New Jersey and Tokyo are performing particularly well​.”