Cake Box Holdings PLC (AIM:CBOX) warned profits for this year will be “significantly” below forecasts as it is crushed on two sides by sharp cost inflation and a softer consumer environment.
Against the backdrop of a long, hot summer that is believed to have held back footfall into its bakery franchises, like-for-like sales declined 2.8% since the start of its financial year on 1 April.
Since announcing results in June, the company said trading has become “significantly more challenging”, with cost pressures increasing more than projected and not expected to ease before the end of the financial year.
“While the group has passed some of the cost increases onto franchisees with a recent price increase, the full year gross margin will be impacted,” it said, noting the "significant inflationary pressures" on both franchisees and customers across the country.
Cake Box noted that it had cash of £6.7mln at close of business on 30 August, prior to paying the £2mln proposed dividend in September, and has a "strong pipeline of potential new franchisees and deposits for sites".
Shares in the company plunged 44% to 100p on Wednesday morning.
Broker Liberum said it was cutting its earnings per share forecast by a third.
"A prolonged summer, a heatwave and consumers going away on holidays has impacted trade. In addition, there are several inflationary pressures which will take time to mitigate, and these factors combine for us to take a c.33% cut to our FY’23E EPS," analysts said in a note.
"We have taken a cautious view on the outlook with the potential for a consumer spending slowdown to impact near-term demand."
"While disappointing to be cutting numbers, there is no change to CBOX’s underlying cash-generative growth story underpinned by franchisee demand for new stores and new channels like online and kiosks in supermarkets, and the model should be relatively defensive as we head into tougher times."