Consumers regain taste for Greggs

The UK’s biggest seller of food-on-the-go is hoping to restore its fortunes following two profit warnings earlier this year by introducing more non-pastry products such as pizza, Viennese fingers and toffee crunches.

It is also staying focused on the budget end of the market with its £2 breakfast deal proving very popular with customers.

The group is moving away from its traditional bakery format towards food-on-the-go.

Greggs, which has over 120 stores in Yorkshire, said like-for-like sales fell 0.5 per cent in the 13 weeks to September 28. That compares with a first half decline of 2.9 per cent.

The firm, which has more UK outlets than burger chain McDonald’s said an improving sales pattern returned in August and September, with like-for-like sales rising one per cent over the eight weeks.

Total sales grew 3.6 per cent, driven by net new shop openings and growth at franchised shops.

Chief executive Roger Whiteside said he was encouraged by the figures.

“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.”

Around 70 stores have been closed this year as the group relocates stores away from the hard-hit high street to places where people work or commute to such as stations and car parks.

“We just don’t sell much any more of bread or cake to take home,” said Mr Whiteside.

He said that the costs of investing in the business are likely to constrain profit growth over the next two years.

“We are encouraged by the recent improvement in like-for-like performance, although with consumer disposable incomes still under pressure we remain cautious,” he said.

He said he could not predict when quarterly sales will return to growth as the trading environment remains fragile.

“We are having to fight for every penny because people don’t have any more money in their pockets,” he said.

Despite its relatively low average transaction value of just over £2, Greggs, which sells bread, sandwiches, savouries, cakes and pastries to over six million customers a week, has been hit by the downturn with fewer shoppers on high streets and unhelpful weather leading to two profit warnings this year. Greggs is refitting and re-shaping its store portfolio as it attempts to gain a bigger slice of the UK’s £6bn food-on-the-go market.

So far this year it has refitted 141 shops and plans 215 in the full year. It now expects no increase in net shop numbers this year as openings match closures. Analysts at N+1 Singer said it was too early to say whether the quarterly figures marked a turning point, but steps to drive growth appeared to be gaining traction.

Analyst Darren Shirley, at Shore Capital, said: “This is a more encouraging third quarter performance. It includes a more robust sales trend through the later two months of the period after a challenging start.”

Canaccord Genuity analyst Wayne Brown said while the latest figures were an improvement, its “sell” rating remains unchanged as profits are under pressure.

Recent surveys have shown an improving outlook for consumer spending, which generates about two-thirds of gross domestic product, but retailers remain wary as inflation continues to outstrip wage increas- es.