Greggs cautious despite improved performance

Bakery chain Greggs says it is remaining cautious, despite encouraging improvements in its performance

A Greggs bakery shop
A Greggs bakery shop

Bakery chain Greggs says it is remaining cautious, despite encouraging improvements in its performance.

In an interim management statement for the 13 weeks to September 28, the company revealed total sales had grown 3.6%, driven by new shop openings and continued growth from franchised shops.

Like-for-like sales dropped 0.5% during the same period, but this represents a significant improvement on the 2.9% decline the business experienced in the first half of the year.

The return of a stronger sales pattern had been expected in August and September, following the impact of the heatwave in July, the statement said. Total sales for the 39 weeks to September 28 increased by 3.5%. Within this, like-for-like sales were down by 2.1%.

Greggs chief executive Roger Whiteside said: “We are encouraged by the recent improvement in like-for-like performance, although with consumer disposable incomes still under pressure we remain cautious.

“We are having to fight for every penny and in that sense trading remains under pressure and fragile.”

He added that cost inflation was in line with expectations and that the group’s cash position remained strong.

“We have made good progress in developing our strategic plan and our focus on the ‘bakery food-on-the-go’ format,” he said.

“Customers are enjoying the contemporary new look, easy-to-navigate range and the provision of seating wherever possible.”

Greggs has been focused increasingly on moving away from the role of traditional baker to cater for those in a hurry looking for freshly made, affordable food.

In August, interim results showed shop sales down 2.9% for the first six months to June 29, resulting in a drop in pre-tax profits of £4.6m to £11.4m for the period – down from the £16m reported the previous year. Greggs, which has over 1,700 shops around the UK, also said profits had been hit to the tune of £2m through the summer’s heatwave alone.

At the time, some analysts expressed scepticism about the company’s ability to shift into new territory, but Whiteside said yesterday: “We are confident Greggs is a great brand. Already, about three quarters of our business is to do with food on the go, so it’s not like we are changing things overnight.”

Improvements in sales performance had been influenced by a range of initiatives from extending opening hours to introducing new products, he added. The company was also competing with the likes of Cafe Nero and Starbucks by increasing the percentage of shops with seats from around 25% to over 80%.

It now has 25 franchised operations, including its first shop with Euro Garages Ltd, which was trading well. Much effort was also being focused on improving its estate, with 141 shop refits completed so far in 2013, and 215 expected for the full year. While Greggs ultimately wishes to have over 2,000 outlets, there will be no increase for now as the number of openings is matching the number of closures as the company shifts its attention to non-high street shops.

“The most important thing now is like-for-like sales,” Whiteside said. “That’s at the core of the business and we’ve got to focus on that growing, so we also have to focus people on the like-for-like estate.”

He added that the company had mapped out a number of key targets and milestones it will use to track progress over the next three years.

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