Hotel Chocolat shares slumped on Friday after the group said it anticipates swinging to a loss in 2023 and posting below-expected profits the following year.
Having warned in April that underlying pre-tax profits for the current financial year were set to break even, the confectionery maker now predicts a modest loss due to the effects of cost cuts appearing later than envisaged.
The Hertfordshire-based company said markets are presently forecasting revenues of £201.8million and an underlying pre-tax profit of around £300,000.
Hotel Chocolat booked a £3m hit from closing all five of its US stores and a further £23m write-off from a business venture in Japan
For the succeeding 12 months, it believes turnover and earnings will be beneath expectations due to weak consumer confidence and inflationary pressures.
Following the announcement, shares in Hotel Chocolat plunged by 15.1 per cent to 118p, one of the ten worst performers on the AIM All-Share Index and more than three-quarters less than their peak of 540p in November 2021.
‘As previously announced, FY23 is a transition year to re-shape the business in readiness for its next stage of growth,’ Hotel Chocolat said in a statement.
‘While excellent progress has been achieved on cost base efficiencies, they are materialising later in the year than initially anticipated.’
Hotel Chocolat’s sales soared during the lockdown period despite the temporary closure of the group’s stores as homebound Britons sought to treat themselves, their families and friends.
It has since struggled with slowing trade over the past year as a result of sliding digital and wholesale revenues and weaker demand over the Easter holidays, with the latter partly blamed on difficulties stocking enough products.
The company has been additionally impacted by troubles in its overseas operation, seeing sales hit by onerous Covid-related restrictions in Japan and supply chain snags in North America.
When its Japanese joint venture partner offered an updated loan-funding proposal, Hotel Chocolat stopped all further investments in the project because of uncertainty about possible future Covid-19 restrictions.
A restructuring process was subsequently launched with the intention of finding alternative funding arrangements, causing a £22million impairment provision for the business.
Yet in January, the firm struck a new strategic partnership with Tokyo-based Eat Creator Corporation, under which it will earn royalty revenues for allowing its name to be on 21 stores.
When the deal was announced, Hotel Chocolat’s chief executive and founder, Angus Thirlwell, said: ‘Our new partner is well equipped to optimise the brand’s potential for Japan, bringing proven expertise, new capital and a natural alignment on brand values.’
