Hotel Chocolat profits and revenue fall as international sales suffer

The upmarket chocolatier reported EBITDA of £22m for the 26 weeks to December 25, 2022, down from £33.8m, as well as a profit before tax more than halving to £10.2m for the period, down from £25.4m the previous year. 

Hotel Chocolat recorded a drop in group revenue from £142.9m to £129.8m, while international sales were down 69%.

Hotel Chocolat reported a 7% increase in like-for-like sales in the UK and posted a new record for its Christmas campaign sales with its “strongest ever sell-through of full-price seasonal products”.

While not giving an exact figure, Hotel Chocolat said online sales were lower year on year as a result of “customer preference to return to stores”.

The retailer also said its wholesale revenue was lower than anticipated at the beginning of the year and attributed the reduction in revenue to “cautious inventory management by online partners” as well as the UK heatwave in the first quarter, which impacted orders.

Founder and chief executive Angus Thirlwell said: “This strong sales performance from Hotel Chocolat stores, underpinned by our scaled database, is a result of hefty investments we continue to make into our brand. Investing in more cacao and less sugar in our recipes, funding nature-positive cacao farming and championing British-made quality and design flair.

“Over the last three years, we have increased retail like-for-likes by 25% through product innovation and improving the quality of our database marketing.

“We have announced the opening of a further 50 UK locations over the next three to five years, with the first wave planned this autumn. Our new ‘store of the future’ design has succeeded against its objectives in test locations and so will be rolled out in these new locations: more space, Velvetiser cafes and constructed from reusable and sustainable materials.

“The Velvetiser in-home drinking chocolate system continued its positive momentum with 888,000 (1 in 17 ABC1) UK households now able to prepare barista-grade drinking chocolate, hot or cold, in just 2.5 minutes. This has been built up in only four years and we now see premium, drinkable chocolate as a major long-term winner for Hotel Chocolat, with our direct-to-consumer capability a key element in its success.

“Having grown sales by 66% since the start of the last pre-pandemic year, as previously announced, we are taking this year, over FY23, to sharpen up our operating model before we embark on the next stage of growth. I am really pleased with the determination I have seen across our teams to get back to running a tight ship again.

“Our adapted plan for international growth – to pursue the proven brand appeal with low risk-low capex operating models – is making sound progress. In Japan, a new strategic partnership was signed and in the US our planning is looking encouraging. Our Saint Lucian cacao agro-tourism business drove revenues up 46%, with our six-acre Project Chocolat visitor attraction the star performer.

“The group continues to trade in line with market expectations for sales though as previously guided, we remain cautious about consumer sentiment over the upcoming seasonal events of Mother’s Day, Easter, Eid and Father’s Day. Depending on the Easter performance, there is a range of profit-before-tax outcomes between £4m and £7m for the full year.

“Following this transitional year in 2023, in FY24 and FY25 we expect to see a return to sales and EBITDA growth with a continued target of 20% EBITDA margin by FY25 (pre IFRS 16 basis).”