Thorntons plc: The One Stock I Would Buy For 2015

A lower oil price is good for economic activity. Company business costs tend to reduce and pressure eases from profit margins. The current lower cost of oil is why I’m optimistic about the prospects for stock markets during 2015.

One of the immediate benefits from lower priced oil is the petrol-pound saved by consumers like you and me. Already, thanks to lower pump prices, I’m seeing my family’s domestic budget stretching further.

Where will these leftover pounds go?

In my case, a pound not spent tends to be a pound that I squirrel away in a bank account. However, I’m well aware that my financial behaviour, and that of many other investors, seems to be different from just about everybody else I know. For most people, a pound not spent seems to become a pound that needs spending as soon as possible!

So where might these bonus pounds saved from the petrol pump end up? My guess is that a good chunk of them could find there way to consumer goods, fashion items, big-ticket items such as white and brown goods, new finance deals for vehicle upgrades and any other type of splurging purchase we can think of. That makes me bullish on retail shares in general for next year, but my expectations are particularly sanguine about firms providing us with ‘quick fix’, consumable luxuries.

Looking at my portfolio, one standout potential beneficiary of extra consumer cash is restaurant chain Tasty (LSE: TAST), which specialises in a good-times blend of pizza, pasta, grilled meat and plonk. The firm’s Wildwood brand is rolling out profitably in the UK casual dining market. However, today, I want to talk about an even more immediate consumer fix — chocolate!

A tempting blend of recovery and growth

British chocolate manufacturer Thorntons (LSE: THT) used to struggle to turn a profit. High-cost leases and other trading expenses from the high street store estate kept the firm struggling. However, a new chief executive, Jonathan Hart, came with a new vision for the ailing chocolate producer. The simple plan involved reducing the store count, mainly as leases expired, and switching the business model over to a fast-moving-consumer-goods approach that involved getting the firm’s product everywhere that it might sell.

Despite the recent pre-Christmas profit warning, generally, the strategy is proving successful. Now, the Thornton-brand appears next to other chocolate packets in almost every food store, and earnings are recovering:

The share price did well, too, rising from around 10p at the beginning of 2012 to just over 165p in March. Since then, the share price has slipped back, but Thornton’s recovery and growth strategy has much further to run, in my opinion. Further own-store closures look set to reduce forward costs and the company eyes more market share gains in British chocolate categories, and international expansion, as the next big frontiers.

What  next?

Thornton’s pays no dividend, which suggests the firm remains confident of its growth proposition in the medium to longer term. The chocolate purveyor’s blend of cost cutting and growth initiatives certainly tantalises my taste buds, and I’m clutching my box of Thornton’s shares with enthusiasm as we move into 2015.