Egg-free celebration cakes supplier Cake Box (LON: CBOX) is prospering in a tough retail environment. The franchised model means that interim profit grew faster than revenues. Trading in October was particularly good, and openings are accelerating with 25 new stores expected in the year to March 2025.
Franchise stores sales increased 8% to £39m. A price increase offset volume declines and like-for-like growth was 2%. Online sales grew even faster than those of the retail sites and they account for nearly one-quarter of the total. This reflects the success of the new co-funded £2m central marketing campaign.
In the six months to September 2024, Cake Box revenues rose 4% to £18.7m, while pre-tax profit improved from £2.4m to £2.79m. Net cash was £5.7m, after spending £686,000 on a site for the extension to the Bradford distribution centre. This enabled a 17% increase in the interim dividend to 3.4p/share.
Seven shops have opened in the first half, taking the total to 232. Seven more have been added since September. Cake Box has plenty of potential sites for stores as other retailers are finding trading difficult. The opening programme will accelerate in the second half. An existing franchisee intends to open a store in Paris.
Loyalty programme Cake Club has been launched and that has signed up 63,000 people. This helped the subscription database to increase by two-fifths to 517,000 over the six-month period.
New cakes are being developed, including a collaboration with Nutella for five new products as part of its 60th birthday celebrations. Cake Box can use the brand without paying any royalty.
The second half has started strongly with store sales 9.9% higher and like-for-like sales 4% ahead. New Year’s Eve is the strongest trading day of the year.
Full year pre-tax profit is forecast to increase 10% to £6.6m, with a further rise to £7.2m next yar.
The share price is 2p higher at 190p, which just below the high for the year of 193p. The shares have not been at this level since August 2022. The prospective 2024-25 multiple is 16 and the forecast yield is 5.2%.
Cake Box has a strong strategy with potential for further growth in sites.