Yule logs and penguins book in profits for Hotel Chocolat

By JOANNE HART, FINANCIAL MAIL ON SUNDAY

Updated:

Hotel Chocolat opened its first American store last week, near Grand Central Station in Manhattan. Last month, the company set up shop in a Tokyo shopping mall. 

And the group as a whole more than doubled profits last year as sales soared.

Benefiting from a strong online presence, a thriving portfolio of physical stores and a growing interest among consumers in quality treats at an affordable price, Hotel Chocolat seems to be doing everything right.

Global: Hotel Chocolat opened its first American store last week, near Grand Central Station in Manhattan. Last month, the company set up shop in a Tokyo shopping mall

Global: Hotel Chocolat opened its first American store last week, near Grand Central Station in Manhattan. Last month, the company set up shop in a Tokyo shopping mall

A new, make-your-own hot chocolate machine, the Velvetiser, has received rave reviews, the chocolate cream liqueur is a big hit with customers and assorted boxes, Yule logs and chocolate penguins are flying off the shelves.

Yet Hotel Chocolat shares have fallen from £4 in June to £2.78 today, another victim of investor nervousness in the current uncertain environment.

Midas first recommended the shares in December 2016, when they were £2.64 so they are up slightly since then. But the business has made much more progress.

Back then, revenues were £91 million and profits were £5.6 million. In the 12 months to July 2019, brokers expect sales of £127 million and profits of £14 million.

Further strong growth is pencilled in for subsequent years, as chief executive Angus Thirlwell expands in the US and Japan, while continuing to drive sales here.

Tip: Midas first recommended the shares in December 2016, when they were £2.64 so they are up slightly since then. But the business has made much more progress

Tip: Midas first recommended the shares in December 2016, when they were £2.64 so they are up slightly since then. But the business has made much more progress

MIDAS VERDICT 

Economic conditions are worrying and consumers are running scared. But almost everyone loves chocolate and Hotel Chocolat offers innovation and quality without breaking the bank.

Even health nuts buy its products, as they offer more cocoa and less sugar than other brands. The share slump of the past six months is unmerited.

Existing holders should stick with the stock. New investors could even regard the £2.78 price as a buying opportunity.

 

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