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Thorntons strong sell through.


Thorntons confirmed it is trading in line with current profit expectations in its Q3/Easter update and we make no changes to forecasts. FMCG sales showed some weakness, although this is due in part to the timing of (larger) orders in this channel. Retail LFLs remain in positive territory and Easter trade was good, with a strong sell through. The group thus expects a better Q4 revenue performance.

  • Thorntons released its Q3 update, covering the period to 26 April, including Easter. It reported that group revenues fell by 7.6%, although, within this, the group had a successful Easter (specialities up 20% in UK Commercial).
  • Retail division revenues fell 6.7% due to ongoing store closures. The group operated out of 38 fewer stores in this period vs Q3 last year; accordingly, own store sales were down 8.8%. Encouragingly, own store LFLs remained positive at 1.2%. Franchise and consumer direct sales were both ahead by over 5.5%.
  • The weakness in Q3 FMCG sales (-8.6%) was not attributable to Easter, which was a strong sales period, but Valentine’s Day and Mother’s Day were slightly below expectations and some spring sales fell early in the year (FMCG was up 20% in Q2). There was also some lacklustre trade very early in the period due to (non-seasonal) Christmas stock carry over. There appears to be little stock overhang post Easter and thus Q4 sales in FMCG are expected to return to growth. YTD FMCG sales are still ahead by 6.8%.
  • Importantly, despite this sales blip, the group is comfortable with current profit expectations (consensus: £7.3m adjusted PBT) and we make no changes today to our (£7m) PBT for FY14E. An unfortunate side effect of the switch from own store sales to FMCG is the increase in average order size and the fact that the timing of such orders can impact on IMS reporting periods.
  • We reiterate our SoTP-based TP of 173p and Buy. Key risks include changing consumer demand patterns.

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