Patisserie Holdings sales break £100m barrier as store openings continue

Sales at Patisserie Valerie owner Patisserie Holdings have topped £100m for the first time as the business continues to grow its chain of bakery stores and cafés.

Revenue has risen 13.3% year on year to £104m, with EBITDA up 18.1% to £22.2m, the company announced in its preliminary results for the 12 months ended 30 September 2016. This is the 10th consecutive year of revenue and profit growth for the business.

Growth had been driven by the opening of 21 new stores in the year, all funded from operating cash. With locations including Belfast, Birmingham Resorts World and Oxford Street in London, the mix of new store sites comprises five high streets, five shopping centres, three retail parks, two motorway service stations and six Debenhams concessions.

Openings included stores in new regions such as Preston, Bradford, Durham, Chippenham, Bury, Doncaster and Camberley. These have lower rentals than traditional larger city locations, and sales are exceeding management’s expectations, reported the business.

'Profitable from first week of trading'

“The performance provides a good indicator of the demand for the growing Patisserie Valerie brand,” said the company in its results statement. “The payback on our stores continues to be less than 24 months and all of our new openings have been profitable from the first week of trading.”

The company also opened its first store opened in Northern Ireland, which has an attached bakery with capacity to support a further 10 stores, and opened a standalone bakery in Edinburgh that it said would enable future expansion in Scotland.

The group closed three stores during the period, taking it to 184 stores at the end of the financial year. It continues to aim for 20 new store openings a year.

Afternoon Teas success

One of the business’ most successful in-store offerings, it said, were the Afternoon Teas launched last year. The company reported that it sold 133,000 afternoon teas in the year, generating sales of £2.3m compared to £1.2m in 2015.

“Afternoon Tea appeals to our customers as it allows diners to try a selection of our cakes, as well as being a great British experience,” it stated. “We have developed a number of variants and will be launching a Festive Afternoon Tea for the Christmas period.”

Online sales had grown 23% year on year, with membership of the brand’s Cake Club up 18% to 361,000 members. The business has also started developing a loyalty scheme that will be piloted in the first half of 2017.

Patisserie Holdings’ margins had benefited from falling ingredients prices, but with ingredients costs increasing, the company said it was confident it could offset price hikes by renegotiating key contracts, making savings in non-direct spends and through further production efficiency.

Cost of National Living Wage

It said that, as anticipated, the largest cost pressure had been the National Living Wage (NLW), which cost it £0.5m across the full year.

“However, we introduced a more efficient labour rostering method in the year, which has almost offset this increase,” it said. “The increase to the minimum wage from 1 October 2016 will be £0.1m and we will continue to monitor and react appropriately to future increases in the NLW.”

Brexit had had “little or no effect on sales”, it reported, and made no impact on its workforce.

“The excellent results for the year show the continuing appeal of our brands, the financial strength of the group and the strong cash-generative nature of our business model,” said executive chairman Luke Johnson.

“We have achieved growth in revenues and profits despite uncertain economic conditions and for the first time we have exceeded revenues of £100m.”

'Well positioned' to make acquisitions

Johnson added that the company’s strategy remained organic growth, but it was “well positioned” to make acquisitions should opportunities arise. 

He also said performance for the first eight weeks of the new financial year had been encouraging, with the business already opening six new stores.

“We have a strong pipeline for the year ahead, with a number of promising locations already secured. We will continue to control costs and manage our supply chain in this period of macro-economic uncertainty, thus I am confident of another successful year of growth.”

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