High-street chocolatier Thorntons (LSE: THT) is falling today, after the company announced that sales fell 12% during the 14 weeks up to and including 4 October 2014.
The company blamed this decline on the timing of sales, as the group continued its transition into a fast-moving consumer goods business. However, based on the current visibility of orders management expects sales growth to pick up during the company second financial quarter. What’s more, despite today’s warning, management remains confident that Thorntons will perform in line with market expectations for the full-year.
Commenting on today’s trading update, Jonathan Hart, Thorntons’ Chief Executive, commented:
“We remain confident of improving EBIT margin further and maintaining positive profit growth for the full year, in line with market expectations driven by strong annual sales growth in our UK Commercial channel…We continue to make good progress with our strategy of rebalancing the business and have exciting plans in place for the key Christmas season…”
Gaining share
Alongside today’s trading update, Thorntons also released its market share figures for the period, which showed growth across all divisions. Specifically, during the period the company’s market share of inlaid boxed chocolates increased by 1.8% to 36.7%, while the company’s market share of boxed chocolates ticked higher by 0.3% to 12.9%.
These figures show that despite increased competition across the confectionery sector, Thorntons still has what it takes to pull in customers.
Trading inline
The key takeaway from today’s trading update is the fact that Thorntons remains on target to meet full-year forecasts. If the company can indeed meet these targets, then the shares look attractive at current levels.
For example, City analysts are currently expecting the company to report pre-exceptional profit before tax of £9.7m for the current financial year, which translates into earnings per share of 10.5p. This implies that the company is currently trading at a forward P/E of 9.4.
Unfortunately, Thorntons does not offer shareholders a dividend payout at present. Nevertheless, with profits surging there’s potential for management to reinstate a token dividend payout in the near future. Management has previously stated that the company will return to a progressive dividend policy when sufficient distributable reserves and cash resources are available.
Should you buy in?
Thorntons has made an impressive recovery since the company ran into trouble just after the financial crisis. And there’s no denying that the company looks attractive at current levels — a lowly P/E of 9.4 could be too cheap to pass up for some investors.