Greggs announce £25m investment plans

Leading baker Greggs has announced plans to invest £25m into the business over the next five years

Greggs lorry on the Quayside
Greggs

Greggs has announced it is to invest £25m into the business over the next five years after citing good progress with its strategic plan.

The Newcastle-headquartered business last year switched its focus to the lucrative food-on-the-go market, dispensing of its Greggs Moments cafes to concentrate on improving its offering of hot savoury snacks and sandwiches and their availability to customers.

The firm admitted that, while defending its position as leading retail bakery business, it has underperformed in food-on-the-go, as new entrants and existing competitors have rapidly expanded shop numbers and better met customer demands.

Greggs embarked on its strategic plan to reverse this last year, but like-for-like sales for the year to December 28 2013 fell 0.8% and pre-tax profits slid 18.9% to £41.3m, following what chief executive Roger Whiteside described as “a year of transition.”

Despite the fall, Whiteside remained upbeat, citing improving trading in the second half of the year, with sales up 1.2%, a figure which rose to 2.6% in the fourth quarter.

A record 216 shop refits to reflect the change in focus also took place, and by the year end the portfolio of 1,671 remained unchanged, with the business making the same number of openings and closures – 68. The new shops drove a total sales of 3.8%, to £762.4m.

Last year also saw a move to relocate shops.

Poorly-performing shops in high streets are being closed in favour of opening closer to customers places of work and travel locations.

Greggs currently has 80% of shops on high streets and 20% in these new locations, but Whiteside said that within five years 40% will be placed at convenient travel and work locaitons for customers and 60% will be on the high street.

Looking ahead, Whiteside said £25m will be ploughed into several systems over the next five years, which he said will impact on profits for two of those years.

Four systems are to be implemented, including a system to help manage staff in shops – currently done with pen and paper – a system to help manage suppliers, another to manage stock and the final system to streamline the ordering of stock.

Yesterday also finally saw the launch of Greggs Rewards, the new app combining mobile payments with a loyalty scheme in which customers will be able to pay in store using their mobile phones.

The app took a year to develop, and Whiteside said “in hindsight” the firm could have got into the digital arena quicker but that: “We are here now and at the front of the queue. For the first time we can identify customers by name, can see how they shop and tailor customer services to their requirements.”

New “meal deals” are also in the pipeline, including a new blend of coffee to rival leading competitors’.

While it may be early days in the firm’s strategy, Whiteside said he was encouraged by the figures in tough and competitive trading conditions.

He added: “I am encouraged by the improvement in performance in recent months as our new strategic focus started to deliver benefits.

“Market conditions are expected to remain challenging in 2014. It will be a year of further change for Greggs as we move forward with our plan to focus on the food-on-the-go market and build on positive recent trading momentum.

“We don’t want to get carried away by saying the business has turned a corner, but we it’s good to see the fruits of our labours coming through.”

The dividend per share has been maintained at 19.5p.

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