Outsiders should follow chief executive officer Jonathan Hart’s purchase of £24,100 worth of shares in chocolatier Thorntons (THT). Last week’s (30 Apr) third quarter trading statement was read as a profits warning, yet the £83 million cap’s turnaround strategy is working and full-year profit forecasts will still be met.

Hart acquired 20,000 shares in the Derbyshire-based fast moving consumer goods (FMCG) group at 120.5p on the day of the update. Numbers man Michael Killick also bought on weakness, spending £23,150 on 20,000 shares priced at 115.8p.

Thorntons disappointed with news that sales over the 15 weeks to 26 April, including the important Easter period, fell 7.6%. Slower sales to a distressed supermarkets sector were seen in February and March, with Valentine’s Day and Mother’s Day proving soft, yet the decline also reflected planned store closures as well as timing issues. Thorntons had previously enjoyed early spring deliveries in the second quarter.

Crucially, all channels generated sales growth over the Easter season, indicative of further market share gains, while retail like-for-like sales remain in positive territory. Expecting its FMCG arm to return to growth in the fourth quarter, Thorntons remains confident of meeting year-to-June consensus taxable profits of £7.3 million.

The latest sales wobble has reminded the market of the seasonally-sensitive group’s previous track record of profits warnings. Yet Shares is sticking with its positive stance on what is one of our key selections (see Plays, Shares 21 Nov, ‘13). Hart’s turnaround strategy to rebalance sales towards the higher net margin FMCG division and restore profitability is delivering results. Thorntons continues to close underperforming stores and improve earnings quality through a focus on products for year-round chocolate gifting too.

A sharp share price dip to 123.1p represents a buying opportunity.

THE TRADE

Key buyer: Jonathan Hart, chief executive officer

Consideration: £24,100

No. of shares bought: 20,000

Subsequent holding: 222,155 (0.32%)

SWOT ANALYSIS

STRENGTHS

• Beloved brand name

• Product innovation

• Ties to retailers

WEAKNESSES

• Highly-competitive market

• Lingering sales seasonality

• Lack of dividends

OPPORTUNITIES

• Accelerate overseas growth

• Raise ticket prices

• Boost ancillary revenues

THREATS

• Supermarkets price war

• Input cost escalation

• Consumer downturn