Hotel Chocolat reports 14% revenue increase – and higher growth costs

Premium British chocolatier and omni-channel retailer Hotel Chocolat’s shares were down approximately 3% in morning trading on Thursday​, despite the retailer reporting a 14% increase in revenues to £132.5m ($173.63m) for the year ending June 30, 2019.

In a trading update for the 13-week and 26-week periods ended December 29, 2019, total Group revenue for the 13-week period increased 11% compared to the prior year.

During the 26-week period, Hot Chocolat opened nine new locations in the UK, ending with 125 locations. Internationally, the Group opened two new locations in the US and three new joint venture locations in Japan, ending the period with four and five locations respectively.

While the Group’s new openings contributed three percentage points of the 14% total Group revenue growth, the cost to deliver growth was ‘modestly higher’ due to ‘inefficiencies in the supply chain’, which are being addressed in 2020, the company said in a statement.

Nigel Frith, a senior market analyst at www.asktraders.com​, told ConfectioneryNews: “Hotel Chocolat’s second half update wasn’t quite sweet enough. Despite impressive double-digit revenue growth across both the quarter and the second half of last year, inefficiencies have made that growth more expensive than forecast and as a result, margins have shrunk. Whilst Hotel Chocolat insists that these inefficiencies will be addressed in the coming year, investors are not prepared to give them the benefit of the doubt​.

“Investors have taken also little solace from Hotel Chocolat’s growing international footprint or the success of its first vegan chocolate bar. The share price has dropped over 3%."​

Angus Thirlwell, co-founder and chief executive officer, said: “This was another strong performance from Hotel Chocolat. In our domestic UK market, we grew our VIP-Me member base to over 1.1m active members, as well as driving strong organic growth from our existing physical locations. We will continue to bring Hotel Chocolat to more locations in the UK where the deals are appropriate​.

“The USA and our joint venture in Japan are both delivering an encouraging performance, growing to four and five locations respectively by the end of period. While much of 2019 was about getting started in these large new markets, 2020 will see us accelerate our supply-chain transformation. This focus will rebalance us from being a UK-based company operating from owned channels, to one more suitable for multi-channel multi-territory international supply​.”

Thirlwell said the launch of Nutmilk, a 100% vegan ‘milk’ chocolate, has been an immediate hit after five years in the making and its Velvetiser in-home hot chocolate system continued to grow in popularity.

The Board expects to announce the Group’s results for the six months ended December 29, 2019 on February 25, 2020.