Hotel Chocolat's Harrogate store is storming ahead after upsizing, says CEO

Hotel Chocolat said it had achieved very strong UK growth as it announced a trading update for the 52-week period ended 26 June 2022.

Over the period, total group revenue increased by 37% to £226m which is ahead of market consensus expectations.

The group announced that second half growth remained "very robust" at 32%, against stronger comparatives in the fourth quarter of the previous year following the ending of lockdowns affecting UK retail from April 2021, when group sales growth began to accelerate.

Angus Thirlwell, co-founder and chief executive officer, which has eight stores in Yorkshire, said: “The Hotel Chocolat brand is achieving very strong growth in the UK, and we are pleased to have beaten sales expectations and expect to meet underlying profit expectations for FY22 (full year 2022).

“The way the market has rapidly changed for all businesses in the second half certainly emphasises the resilience value of investments that we have made over the last 20 years: in building a differentiated brand with strong customer loyalty, a unique and desirable product range, and our own, dependable UK chocolate factory.

“A year of exceptional sales growth following two years of reactionary tactics to the pandemic has left clear opportunities for us to proactively streamline overheads and improve gross margins.

Mr Thirlwell added: "We have set ourselves the target of becoming a 20% EBITDA margin business within three years by applying systemisation, automation, and capacity investments to our 70% larger scale (FY22 vs FY19).

“While we expect a temporary lower sales growth rate and profit margin for FY23 as we carry through our adjustments, the result will be a business delivering greater results, with less risk and an even stronger balance sheet with a higher profit percentage growth in FY24 and FY25.”

“We have discovered that our UK market can be a lot bigger for us than we thought a year ago, thanks to the new drinkable chocolate products - Velvetiser & Velvetised Cream alcohol- and the way our digital and stores businesses are performing.”

Mr Thirlwell added: "Our store in Harrogate is storming after upsizing.”

Commenting on outlook, the group said; "Having raised £40m of new equity in July 2021 to support growth investments, the board has now reviewed the relative performance of each strategic growth driver over the year.

"Given the current global macro-economic climate, the group will now deliberately focus its efforts over the next three years on its most proven and lowest-risk strategies with the greatest potential for further increased profitability and scaled cash generation."

Hotel Chocolat said its commitment to VIP loyalty and digital will continue, and will now form a core part of “business as usual” growth in the UK, without requiring material additional investment in the near-term.

The statement added: "Velvetiser hot chocolate system and Velvetised chocolate cream alcohol continue as capex-light growth categories, with significant further UK market headroom, and the potential for risk-contained capex-light international wholesale growth."

"In response to the change in the global macroeconomic environment, investment levels in the USA and the Japan joint venture will be materially reduced, with ongoing investment limited to essential working capital only."

"The focus on profitable drivers will mean lower sales growth in the short term, and some transitional costs leading to lower profits in 2023, with the objective of higher profits thereafter."