Cake Box shares sink after warning profits could be sliced by cost pressures

Cake Box has warned full year profitability could be “significantly below current market expectations” as the cake maker battles inflationary cost pressures.

In a trading update on Wednesday, the British firm said while current trading was robust against a very strong comparative trading period in the first half of 2022, the board remained mindful of an increasingly challenging economic and trading environment.

Cake Box said that despite passing some of the cost increases onto franchisees with a recent price increase, the full year gross margin will be impacted. 

The company’s share price dived by almost 40 per cent on Wednesday afternoon.

Like for like sales declined 2.8 per cent in the first half of the year to date.

It said the recent heatwave impacted store footfall during the summer months.

However, the firm said that looking further ahead, the board remained confident in Cake Box’s “future growth prospects.”

This confidence was “underpinned by the increased investment in professionalising the group’s functions and the pipeline of new store openings across the country, with levels of franchisee deposits remaining at good levels.”

The group said it continued to have a strong balance sheet and had cash as at close of business on 30 August 2022 of £6.7m, prior to paying the proposed dividend of £2.0m in September.

Back in June, Neil Sachdev, non-executive chairman, said the business aims to open 24 new stores in the coming year, which should bring the total to 200 by autumn.