Online rescues Hotel Chocolat

Chocolate maker and retailer Hotel Chocolat (LON:HOTC) managed to replace a large part of the loss in high street sales by online revenues. However, profit has been hit by higher costs.

The 2019-20 pre-tax profit is expected to be just over £2m, which is well down on the previous year’s figure of £14.1m. profit growth had been forecast earlier in 2020.

Second half revenues fell by 14% with the poor performance in the fourth quarter. Easter trading was hampered by the lockdown. When the stores were closed and online was the only source of business there was enough of a transfer of demand to ensure that overall sales were still two-thirds of what they would have been.

Recurring revenues and subscriptions have grown. Trading in the US and Japan has shown similar trends to the UK.

Some stores opened in the middle of June, so they contributed for two months at the end of the financial year. The 2019-20 figures are due to be released on 29 September.


Distribution costs have increased. Initially, some products had to be shipped back to the distribution centres from the stores.

There were also additional distribution costs due to the need to reconfigure warehouses in order to make them safe for the employees.

The balance sheet is strong thanks to the fact that Hotel Chocolate raised £22m at 225p, compared with a share price of 407.5p at the beginning of March. There was £25m of cash at the end of June 2020, plus £35m of additional borrowing facilities.

A review of fixed assets will lead to a non-cash write-down.

This year

Like-for-like store sales have fallen in the first few weeks of this financial year. Only three stores are showing growth. City centres and travel hubs are performing worst. Some stores are yet to reopen.

It is still difficult to assess how well Hotel Chocolat will perform this year. Peel Hunt is forecasting a loss but admits that the outcome could be significantly different to that.

Hotel Chocolat always had a high rating so it may not be that surprising that the share price has not bounced back as far as some other AIM companies. The share price has improved to 305p, but it was more than 500p in January.

The strength of the brand is behind the high share price. Based on Peel Hunt’s forecast for 2021-22, the prospective multiple is more than 80. If trading improves faster than expected then this rating could reduce, but it still leaves little reason to push the share price higher.

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Andrew Hore
Andrew Hore is the publisher of AIM Journal, which is an online monthly publication covering the Alternative Investment Market.