MARKET REPORT: Hotel Chocolat takes hit with second profit alert

Investors know things are bad when Britons stop treating themselves to chocolate.

Hotel Chocolat was once a darling of the small cap market, mentioned in the same breath as posh tonic maker Fevertree (flat at 1250p).

At its height, investors rushed to buy a piece of the action as the charismatic founder and chief executive Angus Thirlwell vowed to make chocolate exciting again.

He said back in 2016: ‘When we started, chocolate in England was extremely boring and there was just no innovation or excitement about it. We knew that the ingredients had to be the best.’

So passionate was he that in 2019, Channel 5 aired a two-part documentary titled Inside Hotel Chocolat followed by a second season a year later. But life is very different now and the cost of living crisis has taken the shine off Thirlwell and the company.

Bad taste: Hotel Chocolat was once a darling of the small cap market

Yesterday Hotel Chocolat served up its second profit warning in two months against a sour backdrop of sky-high inflation and wage and cocoa costs. It even had a rotten Easter with sales ‘lower than expected.’

As a result, the Hertfordshire-based company said it won’t hit current earnings forecasts.

In fact, the performance has got so bad that some brokers believe it could be a takeover target.

One broker, who wished to remain anonymous, said: ‘I wouldn’t be surprised if it was on the radar of [chocolate rivals] Nestle or Ferrero, particularly given the low valuations of companies in London at the moment.’

Shares were down 17.3 per cent, or 24p, to 115p.

Among the blue chips, online grocer Ocado was the biggest drag on the index, falling 5.3 per cent, or 30.2p, to 537.6p as speculation that it might be being circled by Amazon began to dissipate.

The FTSE 100 fell 0.5 per cent, or 40.16 points, to 7461.87 as it racked up its fifth consecutive day of losses. The FTSE 250 fell 1.5 per cent, or 265.64 points, to 18062.33

The main index has gone the full week without a single positive session for the first time since October 2020, before the discovery of a Covid-19 vaccine caused a rally in global stock markets.

Investors flocked to safe haven assets, in particular Big Tobacco.

British American Tobacco added 1.4 per cent, or 35.5p, to 2625p, and Imperial Brands gained 1.1 per cent, or 18.5p, to 1772.5p.

Imperial Brands was also being aided by a new contract. The company has bought nicotine pouches from Canada’s TJP Labs for £65m. The tobacco group – which houses Davidoff and Gauloises – said it will relaunch the pouches in 2024 under a new brand.

‘While it will take time to build our presence in this category, the proposition has tested strongly with consumers,’ chief executive Stefan Bomhard said.

Investors always back cigarette makers in the face of a downturn as consumers smoke more during recessions. But once again it was higher inflation and interest rates which spooked the markets.

Airlines in particular took a tumble as travel is expected to be the first sector to be hit if mortgages keep on rising.

British Airways and Aer Lingus owner IAG lost 4.2 per cent, or 6.9p, to 158.95p, Ryanair fell 2.5 per cent, or €0.41, to €16.27 and Easyjet dropped 4.7 per cent, or 23.2p, to 472p.

The fear of more expensive mortgages weighed on the big housebuilders again too.

Persimmon lost 4 per cent, or 44.5p, to 1059p, Redrow declined 3 per cent, or 13.6p, to 439.2p and Berkeley slid 2.6 per cent, or 99p, to 3773p.

Energy giants also took a knock as Brent Crude fell amid worries interest hikes could sap demand for oil. BP lost 1.2 per cent, or 5.35p, to 454.65p and Shell slipped 0.6 per cent, or 15p, to 2318.5p.