LONDON (Reuters UK) - Chocolate retailer Thorntons (THT) said costs had climbed more than expected and sales growth had slowed in the third quarter, knocking its shares, but it expects a satisfactory outcome for the year.
Thorntons's own store sales grew 5.1 percent to 33.8 million pounds in the third quarter to April 19, or 0.5 percent on a like-for-like basis, down from 1.2 percent growth in the second quarter.
Thorntons said this was a "pleasing result" given the short Easter selling season this year.
Total sales grew by 8.5 percent to 52.4 million pounds.
"In line with other manufacturers and retailers, we have seen increased costs marginally ahead of our expectations," Chief Executive Mike Davies said in a statement on Wednesday.
"We are confident that we will deliver a satisfactory outcome for the full year," he added.
Shares in the retailer were down 4.2 percent at 144 pence at 9:30 a.m., valuing the company at around 97.5 million pounds.
"Thorntons remains upbeat on the outlook for 2008/09 and NPD (new product development) could drive earnings upgrades if gross margins are maintained," Numis analyst Nick Coulter said in a note.
"However we think the market is unlikely to give any high street retailer the benefit of the doubt in the current environment," Coulter said, cutting his rating on the stock to "reduce" from "hold" and with a 130p price target.
Like-for-like sales at Thorntons's own stores, which account for about two-thirds of total sales, were up 2.8 percent for the year, having risen by 9.6 percent in the first quarter and by 1.2 percent in the second.
Kaupthing analysts said the third-quarter sales performance was "fairly credible" given the timing of Easter and the related shortfall year-on-year.
"Given the current hiatus around food produce, the fear of raw material price inflation pressures could begin to weigh on this stock albeit top line progress is being maintained," they added.
(Reporting by Mike Elliott; Editing by Paul Bolding)
