- Second half momentum improvement
- Profit guidance ‘slightly’ increased
- New branding well-received
Cake Box (CBOX:AIM) shares sweetened up 6.2% to 171p on Monday after the fresh cream celebration cakes retailer said full year profits will be ‘slightly’ ahead of the £5.9 million consensus estimate, implying a 10% year-on-year uplift, after trading momentum improved in the second half.
As a result, revenue for the year ended 31 March 2024 fattened up 9% to £38 million with like-for-like franchise sales 4.4% ahead, while Cake Box’s margins benefited from the more stable raw material cost environment and efficiencies from investments in the business over the past 18 months.
TASTY UPDATE
Enfield-based Cake Box, which rejected a 160p per share takeover offer from The Cheesecake Shop owner River Capital last summer, is putting a 2022 accounting scandal behind it and delivering positive progress under a strengthened senior management team.
Improved second half momentum was driven by further new store openings, positive sales growth from enhanced marketing campaigns, higher online sales and the launch of innovative new products.
The half also saw Cake Box launch a new CRM system, e-commerce website, and a brand identity refresh - nine stores now carry its new, more premium livery – which has been ‘well received’ by customers, according to the company.
Mindful of the pressures facing consumers during the cost-of-living crisis, Cake Box is keeping its pricing strategy under regular review to ensure demand for its offering remains high.
APPETITE FOR EXPANSION
A total of 20 new stores opened during the year, taking the total number of stores across the estate to 225, up 10% year-on-year as Cake Box executed on its more proactive property strategy.
Having closed the year caked up with £7.3 million net cash in the coffers, Cake Box has engaged external property consultants to develop a strategy to reach its 400-store long term target.
This has progressed well with around 200 target areas already identified for new stores.
WHAT DID THE CEO SAY?
Co-founder and CEO Sukh Chamdal said he was ‘delighted to have delivered a year of solid growth in all our key performance areas and full year profits slightly above expectations despite the backdrop of uncertain macroeconomic conditions. We expect to report an increase in all key financial metrics, an uptick in sales of products online including our “click and collect” offer as well as in-store sales and an increased number of franchise stores.
‘We are very pleased with the feedback from the launch of the new Cake Box brand identity from our customers, which will continue to bring new customers to experience our wonderful products.’
THE BROKER’S TAKE
House broker Shore Capital commented: ‘With some of the clouds over the UK consumer economy lifting (in our view) we believe Cake Box is now very well placed to deliver on its evolved growth strategy, with a more proactive property strategy, enhanced marketing capability combined with the considerable knowledge and experience of founder and CEO Sukh Chamdal.’
The broker added: ‘Cake Box remains immature, and after two years of stability and consolidation looks well positioned to deliver sustainable capital light, cash generative medium to long-term growth.’
