("Thorntons" or "the Company")
Thorntons today announces the conclusions of its strategy review and how management will re-position the business over the next three years. The aim is to rebalance the organisation and capitalise on Thorntons' brand strength through a more focused retail estate with a differentiated customer proposition, a renewed customer focus and a compelling commercial, franchise and online offering.
· This strategy:
§ Creates a de-risked business delivering returns over the medium term in line with the sectors in which we operate and positions the Company for sustainable future growth
§ Creates a profitable and sustainable Own Store channel of around 180 stores with a differentiated and less seasonal proposition
§ Focuses on driving good growth from our Franchise, Commercial and Thorntons Direct channels
- Our Franchise estate will grow as Own Stores are closed and replaced with a Franchise in the majority of locations, thereby protecting contribution and customer goodwill
- Our Commercial channel will continue to grow strongly benefiting from increases in breadth and depth of distribution
- Thorntons Direct will see its role change as the 'customer direct' segment aligns with and supports Own Stores
§ Delivers savings in supply chain and central costs of more than £2m on an annualised basis, the benefit of which will be delivered from FY2012/13 onwards
§ Has been developed to ensure that we maintain and grow our factory production levels within current capacity as we rebalance our business across all channels
· Current trading continues to be challenging, in line with our expectations
· The Thorntons Board expects to recommend a nominal final dividend for the year ended 25 June 2011. Thereafter, the Board intends that dividends in the medium term should be sustainable and progressive with dividend cover broadly in line with sector peers.
Jonathan Hart, Thorntons' Chief Executive, commented:
"Thorntons is a strong, trusted and highly valuable brand with excellent potential. Our goal is to refocus the business across all channels and seek to deliver industry competitive returns over the next three to five years. Although we see the prospect of weakness in High Street footfall and consumer sentiment continuing, I am confident that this strategy is right. We continue to adapt in order to meet the changing needs of our customers, while at the same time retaining our current presence on the High Street through our Own Stores and our Franchise business."
For further information please contact:
Nadja Vetter / Emma Crawshaw, Cardew Group T: 020 7930 0777
A presentation for investors and analysts will be held today at the offices of Investec (2 Gresham Street, London EC2V 7QP) at 11.00am.
The review has re-affirmed our confidence in the strength of the Thorntons brand, which continues to gain market share year on year. Thorntons' existing multi channel approach has not only allowed us to spread risk but has also enabled us to meet the changing needs of our customers. It provides the platform for a successful restructuring as well as opportunities for future growth.
In recent years, there have been significant changes in consumer shopping behaviour and this, combined with limited investment in our stores, has led to the situation where our Own Store portfolio requires restructuring, both in terms of location and proposition.
We strongly believe that our Own Store portfolio remains important to the future success of the Company, not only as a profitable distribution channel, but also in being instrumental in bringing the brand to life, supporting and driving sales across the whole of the business.
Restructured Own Store portfolio
We have performed a detailed store by store review of our portfolio which has concluded that Thorntons:
§ can run a sustainable and profitable Own Store channel of between 180 and 200 stores
§ will close a minimum of 120 stores over three years, taking advantage of the lease expiry profile, at a total cost of £4.2 - £4.8 million
§ will explore opportunities to close up to a further 60 stores over the same period, and
§ may re-site or open stores in the UK's top 100 retail locations if opportunities arise and if the potential is confirmed.
A differentiated Own Store proposition
Our objective is to encourage existing customers to visit and purchase more frequently, therefore we will:
§ Develop a differentiated and less seasonal business - while Thorntons will always be strongly associated with the key selling seasons, we will grow the relevance of other all year round gifting occasions in our customers' lives e.g. birthdays, anniversaries, congratulations, thank yous, etc
§ Create relevant new products - we will extend our core gifting category by introducing an innovative range of good value "little gifts"; launch some of our existing best-selling gifting ideas from Thorntons Direct; increase the number of opportunities to customise gifts; and develop a new flagship boxed chocolate brand in 2012
§ Improve the merchandising and displays - we will be refreshing our overall approach; introducing lower density merchandising in store; more products displayed out of packaging; and more space for the quality of the chocolates to be demonstrated
§ Improve the customer experience - the store teams will lead the transformation of the retail offer and a new customer sampling and service programme will be launched in the next couple of months.
Implications for manufacturing and other channels
Our plan has been developed to ensure that we maintain and grow our factory production levels within current capacity as we rebalance the business across all channels.
Our Commercial channel will benefit from the reduction in the Own Store estate and become the main sales channel over the next three years. We anticipate further growth in breadth and depth of distribution and increased market share during key seasons, in particular Easter.
The Franchise estate will play a key role as we restructure our Own Store portfolio. We will seek to secure a Franchisee in the majority of locations where an Own Store is closed and so protect contribution and customer goodwill.
Thorntons Direct is expected to continue to grow and will see its role change as it becomes more closely aligned with our Own Stores.
We foresee continued steady growth in the short term and will be investigating the potential over the medium and longer term.
We will continue to improve business efficiency, lowering costs and increasing profitability in order to support the implementation of the strategy. We have been undertaking a comprehensive review of all major costs and contracts and yesterday announced the outsourcing of our warehouse operation and distribution function. Overall we will deliver savings in our supply chain and central costs of more than £2m on an annualised basis, the majority of which will benefit performance from 2012/13 onwards.
As a result of a split in his marketing and retail responsibilities, Peter Wright, Marketing Director, has decided to leave the Company and will step down as a Director, leaving the business on 1 July 2011. The Board of Thorntons would like to take this opportunity to thank Peter for his contribution and wish him all the best for the future. Jonathan Hart will assume overall responsibility for the Own Store channel.
Current trading continues to be challenging, in line with our expectations.
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Stores as at 26.06.10
Stores as at