Thorntons expects eCommerce turnaround

Chocolate maker Thorntons today indicated that it was disappointed with online revenues in its financial year to 29 June, as glitches with its website saw sales drop 10% compared to the previous 12-month period.

In its preliminary results announcement, published today (11 September), CEO Jonathan Hart said that Thorntons Direct sales – which include the firm’s consumer and corporate online business – dropped from £10 million in 2012 to £9 million. This was not to do with lack of demand, Hart noted, but to do with operational issues related to the launch of a new website last summer.

“We encountered significant issues with the development and late deployment of our new website which was launched in September 2012 without the planned full functionality and consumer offer,” he admitted.

“This was compounded by operational issues during our key Christmas trading period which led us to moderate our marketing efforts in order to protect customer service.”

Over the last few years, Hart has been leading a transformation of the Thorntons business, which will ultimately see the company have less of an own-store retail estate and a greater focus on selling through other retailers.

This strategy is reflected in the trading figures, which show that overall sales in own stores declined by 8% to £102.5 million as 35 stores closed during the year. Like-for-like store sales were down 0.8%, which is an improvement on last year when they had fallen 3.8%, suggesting that the business is getting closer to reaching its optimum store portfolio size.

In contrast, the wholesale part of the business seems robust, with UK commercial sales up by more than 11% compared to last year. Overall group profitability has also returned, with profit before tax and exceptional items up to £5.6 million from £0.9 million one year before.

In the preliminary statement, Thorntons talks of its evolution to become a multichannel business, and a well-functioning website and logistics network will be crucial to these plans.

Neil Saunders, managing director of retail research group Conlumino, said that the latest figures show the transformation strategy undertaken by the senior management at Thorntons has been “broadly successful”, but he also suggested that the eCommerce problems resulted in a lost opportunity for the company.

“Given that online sales of chocolate and confectionery are growing strongly, [a 10% sales decline] was a disappointing outcome and is something that the company will need to remedy if it is to take future advantage of this lucrative channel,” he warned.

CEO Hart acknowledged that the Thorntons Direct business is back on track following last year’s issues, meaning it is fully functional as the retail industry heads towards Christmas and one of its busiest periods of the calendar.

“We have made considerable progress towards addressing the issues and our website now looks and feels fresh and is working well,” he argued.

“We are confident that we will see a return to growth in the first half of the 2014 financial year. Despite being a small part of our overall business, the opportunity for the consumer online business remains strong and we are continuing to invest appropriately.”