Greggs’s results ‘show encouraging signs’: City

The baker posted total sales up by 3.8% to £762.4M, while like-for-like sales  fell by 0.8%. But pre-tax profit, before exceptional items was down by 18.9% to £41.3M.

N+1 Singer said it was too early to judge sustainability of the improved momentum. But it added: “We firmly believe the group is in a much better position than 12 months ago and is executing a cogent / retail product strategy to rebuild market share.”

Current trading was positive, despite weather-related anomalies, it said.

Less of a bakery take-home business​

Ian Durant, chairman of Greggs, acknowledged market conditions continued to prove challenging, with sales and profit below expectations – particularly in the first half. In response to changing shopping habits, Greggs was becoming predominantly a bakery in the food-on-the-go operation and less of a bakery take-home business.

“Food on the go in the UK is a growing market of £6bn​ [according to Allegra] and some 75% of customer visits to Greggs fulfil a food-on-the-go need,”​ said Durant in his chairman’s statement.

Durant added that the restructuring of the business would take a number of years to complete. It would focus on “great tasting food, a great shopping experience, simple and efficient operations and improvement through change”.​

Delivering the programme would bring a sustained improvement in like-for-like sales and prepare the business for long-term profitable growth, he said.

Structural and operational changes​

N+1 Singer praised the structural and operational changes, while noting that the competitive landscape was likely to remain challenging. The analyst raised its profit before tax forecast for the 2014 financial year by 4.7% to £42.2M.

For financial year 2015, it predicted that cost savings of about £2M, arising from the structural changes, would lead to a 8.5% rise in profit before tax to £44.6M.

Roger Whiteside, chief executive, said last year was a year of transition, as the company implemented its new strategic focus, announced last August, centred on the growing food-on-the-go market. “Whilst total sales for the year rose 3.8% like-for-like sales were down 0.8% reflecting the tough and competitive trading conditions. However, 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 food-on-the-go market and build on positive recent trading momentum.”​

Last month Gregg's warned more than 400 jobs were at risk as the business closed in-store bakeries and streamlined management and staff structures.

Greggs – at a glance​

• Total sales up by 3.8% to £762.4M

• Like-for-like sales down  0.8%

• Improving trend of like-for-like sales, with H2 up 1.2% and Q4 up 2.6%

• Pre-tax profit (before exceptional items) down by 18.9% to £41.3M

• New strategic focus centred on the growing food-on-the-go market

• Record 216 shop refits in the year

• Overall shop numbers unchanged with 68 openings and closures

• 70% of 2013 new shop openings in non high street locations

• 1,671 shops trading at December 28 2013, including 25 franchised units

Source: Greggs