Retrenchment for Thorntons following strategic review

The words “strategic review” should be enough to alert all business teachers to a potentially rich seam of teaching material. And today’s announcement of a significant retrenchment by Thorntons is no exception.

“Strategic reviews” almost inevitably follow the appointment of a new CEO. The process of a new leader evaluating the competitive position of a firm and its products/brands provides very often results in a shift in strategic direction (particularly where the new CEO has been appointed with a mandate to effect change).

In the case of Thorntons, the new CEO is Jonathan Hart. He has identified that the existing competitive position of Thorntons as a specialised retailer carries too many risks. The business is over-exposed to fluctuations in consumer spending; demand is too seasonal (relying on Christmand and Easter - unsurprisingly for a chocolate retailer!). The high fixed costs of owning and operating a retail chain result in wild changes in profitability as revenues change.

So what actions has Hart decided are necessary for Thorntons? You can read the detail here in his statement to investors:

The key points include:

- At least 120 stores to be closed over three years (as existing leases expire) + potentially 60 other stores
- New product development to focus on building revenues outside the traditional busy periods
- Improved store merchandising (an operational/marketing change rather than a strategic change, really)
- Increased sales of products made for other retailers (by the Thorntons factory)
- Grow the Thorntons franchise portfolio
- Aim to cut operating costs of around £2m per year from the supply chain