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Thorntons shares down after warning

Chocolate-maker Thorntons saw its shares tumble by more than a quarter today after it issued a profits warning in the middle of the crucial Christmas trading period.

The Derbyshire-based retailer, which has 249 stores, said its full-year earnings will be lower than last year due to weaker supermarket demand as the grocery sector grapples with difficult trading conditions.

It also blamed teething problems at a new centralised warehouse in Derbyshire which opened in the autumn but has resulted in lost and late sales.

Shares slumped by as much as 27% today as the warning delivered a setback to the company's continuing turnaround strategy.

Thorntons has relied on more sales through its commercial channels such as supermarkets as it comes to the end of a three-year plan that has seen it close dozens of its own stores.

In October it told the market it expected to meet full-year pre-tax profit forecasts of £9.65 million for the year to June, up almost a third from £7.5 million in its last financial year.

It now expects profits for the current period will fail to grow after a "significant reduction" in previously-indicated orders from major grocers who also took in stock later than anticipated.

Independent retail analyst Nick Bubb said: "Embarrassingly, less than six weeks after an upbeat strategy update with analysts, today has brought a Christmas profit warning from Thorntons."

Thorntons' sales have fallen in the supermarket price war that has seen major players such as Tesco lose market share to German discounters Aldi and Lidl. This has squeezed the prices suppliers charge supermarkets.

The chocolate-maker said: "The performance in the grocers has been mixed, with good growth in several of our major partners yet significant volume decline in some others where prior year sales of high-volume lines have not been repeated."

It added that the teething problems at its new warehouse in Alfreton, close to its head office in Derbyshire, caused disruption for all its customers despite extensive prior testing at the site.

For its commercial channel customers, the problems led to missed promotional slots and re-orders.

But the firm said the new depot would result in improved capacity and service to customers in the future.

The business added that its new warehouse was now working normally, while its retail store estate was also experiencing like-for-like sales growth.

Begbies Traynor partner Julie Palmer said: "Despite reporting strong sales of its seasonal Christmas products, lower-than-expected orders from the UK's largest supermarkets have hit Thorntons hard this festive season, reducing its visibility among its core customer base at what should be one of its busiest trading periods."

Investec said it had now placed all of its forecasts for the business under review, and would await Thorntons' next trading update on January 19 for greater clarity on trading.

In October it reported a quarterly sales slump due to lower supermarket demand and a quieter period for its own high street stores.

The business said then that revenues through commercial channels such as supermarkets fell 12.8% to £20.8 million in the 14 weeks to October 4, causing group sales to tumble 11.9% to £41.4 million.

Thorntons has said it plans to reduce the size of its store estate to between 180 and 200 outlets over the medium term.

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