Hotel Chocolat upgrades full-year expectations

Premium chocolatier Hotel Chocolat said on Monday that trading for the year to 27 June 2021 is set to be "significantly ahead" of expectations as it reported a jump in revenues.

In an update on trading for the eight weeks to 25 April, the company said that despite stores in England being closed for six weeks of the period - including Mother’s Day and Easter - revenues rose 60% from the same period a year ago. Compared to the same period in 2019, which is the most recent comparable pre-Covid trading period during which stores in England were open, revenues were 19% higher.

Growth was driven largely by the company’s digital channels and subscription products. Hotel Chocolat said that since the re-opening of its stores in England on 12 April, sales across all channels have been "encouraging", hence the upgraded expectations.

In addition, the group also announced plans to repay the furlough funding received from the government this financial year. The cost of the repayment, about £3.1m, will be accrued in the 2021 results.

Co-founder and chief executive Angus Thirlwell said: "In the past year, we have added over one million customers to our database, an increase of 47%. Our strong Easter is entirely thanks to them.

"It feels great to have our physical locations back open again and we have a strong pipeline of exciting new products to launch over the summer, including our Rabot Estate Coffee brand, Strawberries & Cream iced chocolate drinks for our Velvetiser system, and Neapolitan chocolate macarons for al-fresco dining."

At 1350 BST, the shares were up 10% at 385p.

Broker Peel Hunt, which rates the stock at ‘buy’, said: "The key number to draw from the statement is that total FY21 sales grew 19% on FY19. We consider that pretty stellar given the stores were only open for two weeks this year: online has been on fire.

"Our forecasts edge up today (10% for this year, 20% next), but the key point here is that the brand is going from strength to strength and may be a net beneficiary of the crisis.

"The valuation does not leave much room for error, but upgrade momentum persists here, and we raise our target price from 400p to 450p."

Russ Mould, investment director at A- J Bell, said: "Seasonal trading can be a mixed blessing for a business - clearly it leaves you heavily reliant on just one or two periods but when it goes right, as it has for chocolatier Hotel Chocolat, the impact can be highly impressive.

"More and more people seem to be reaching for Hotel Chocolat products when they want a little bit of affordable luxury and occasions like Mother’s Day or Easter have been celebrated with gusto by people looking to break up the monotony of lockdown.

"Nonetheless it’s still impressive that the sales in the eight weeks to 25 April were up substantially not just on last year’s heavily disrupted trading but also on pre-Covid levels in 2019.

"It demonstrates that the company has done a good job of adjusting to the realities of the pandemic by shifting more of its sales through its website and third parties when its stores were unable to operate.

"The recent exit of rival Thorntons from the high street may also prove helpful to Hotel Chocolat as the easing of restrictions continues, allowing it gobble up market share."