Hotel Chocolat: Online sales fail to mitigate effect of store closures

Hotel Chocolat has announced that its boost in online sales has failed to “fully mitigate the total sales loss in the key three-week Easter trading period of 2020.

In its latest trading update, the group noted the nationwide lockdown on 23 March has had a “material impact on trading”. 

However, the group said it was able to “rapidly leverage” its direct-to-consumer multichannel model to redirect demand to online, and modified its distribution warehouse operations to operate safely, with a temporarily reduced product range. 

The chocolate retailer has also implemented a “broad range” of actions to manage its costs and cash flow during lockdown, and modelled a scenario with business disruption continuing throughout 2020.

The group now remains “encouraged by the agility and resilience of the business model and continues to explore further avenues for online growth whilst working safely”. 

In its latest update, Hotel Chocolat announced it has also successfully secured a new £35m revolving credit facility with Lloyds Bank plc, replacing its existing £10m overdraft facility. 

The retailer noted that £25m of the facility was provided by Lloyds Bank under the government CLBILS loan guarantee scheme, and is set to expire in December 2021. 

The further £10m is provided on normal commercial terms expiring at the end of December 2020. 

For as long as the £25m facility remains in place, the group will be restricted from paying dividends, though it is able to cancel all or part of this RCF at any time through repaying the monies drawn. 

The increased banking facility follows its recent equity placing, announced on 20 March, from which the group raised £22m to fund growth capital investment and provide operational headroom. 

Angus Thirlwell, co-founder and CEO of Hotel Chocolat, said: “Hotel Chocolat is a strong brand with differentiated products, a loyal customer base, and a vertically integrated direct to-consumer business model, built for agility. 

“It is a reflection of these attributes that we have been able to add additional banking cover to the over-subscribed equity placement in March.” 

He added: “The financial headroom gives us greater resilience against ongoing disruption and enables us to move onwards with longer-term growth opportunities.”