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Hotel Chocolat builds on customer loyalty

The group beat profit expectations, despite the cost of international expansion
September 24, 2019

If it’s true the world over that when people are upset, they reach for the chocolate, then perhaps we shouldn't be too concerned with how well Hotel Chocolat (HOTC) is doing, even though it's trading in an increasingly competitive environment. In the event, the chocolatier’s results for the year to June came in ahead of expectations thanks to strong growth in domestic markets, but it is the growth of new products, initiatives and markets that have attracted our attention.

IC TIP: Buy at 381p

The group continued its international expansion, with new locations in both Japan and the US, and another handful of openings expected by spring of next year. Management said trading in both countries is in line with expectations, but remains “sub-scale”, with losses from the US business suppressing group profits. Conversely, demand in the core UK division has remained strong, justifying the expansion of the group's domestic footprint by 14 stores. 

Broker Peel Hunt is forecasting adjusted EPS of 10.3p for 2020, up from 9.5p this year.

HOTEL CHOCOLAT (HOTC)  
ORD PRICE:381pMARKET VALUE:£429m
TOUCH:377-384p12-MONTH HIGH:385pLOW: 253p
DIVIDEND YIELD:0.5%PE RATIO:39
NET ASSET VALUE:44pNET CASH:£5.8m
Year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2015812.9nanil
2016915.63.9nil
201710511.27.81.6
201811612.78.81.7
201913214.19.71.8
% change+14+11+10+6
Ex-div:21 Nov   
Payment:20 Dec