An Easter feelgood factor for Greggs

Chief executive Ken McMeikan said the firm had identified healthy foods as an area to drive growth despite his concern the UK economy will be “tough” for the rest of the year.

The chain, which sells bread, sandwiches, savouries and cakes and has more than 150 shops and nearly 2,000 staff in Yorkshire, said the warm April weather and a series of celebrations had pushed up revenue.

It posted a 4.8 per cent rise in sales for the 18 weeks to May 7, with sales at stores open for more a year, up 0.8 per cent.

The rise includes sales of three million hot-cross buns, 600,000 Easter cupcakes and 400,000 Easter cornflake nests as well as 200,000 Royal wedding products in a period containing four bank holidays.

Revenue from Easter-related food was up 5.5 per cent on last year, and Mr McMeikan said the “feelgood factor” had returned briefly.

He insisted Greggs had long promoted healthy eating and cited recent innovations like adding porridge to its breakfast menu and making one-third of its sandwiches free of mayonnaise.

He said that having successfully targeted the UK breakfast market last year, with meal deals combining sausage or bacon rolls with tea and coffee, the Newcastle firm sees healthy foods driving growth.

“We think there is still more opportunity for Greggs around the healthier market, things like side-salad pots, fresh fruit pots, pasta pots and yoghurts,” he said after yesterday’s trading update. The firm is also looking at the take-home or after-work market.

It forecast “marginally positive” like-for-like sales growth for the full year, along with top-line sales growth generated from an extra 80 shops.

But Mr McMeikan said that the rest of the year would be “tough” for consumers and warned that the sluggish economic recovery could continue into 2012.

Greggs said costs continued to rise significantly as a result of commodity price increases but efficiency measures would minimise the need for price rises.

When asked about artificial spikes in commodity prices, Mr McMeikan said it could be hard to measure the effect of traders’ behaviour.

“There are probably quite significant players out there speculating and making money from commodities.

“It puts enormous pressure on consumers if that is what they are doing. It is a concern but it is very difficult to for us to get absolute sight on.”

Shore Capital analyst Darren Shirley said he was “encouraged” by like-for-like sales rise and the contribution from new space but Patrick Coffey at Liberum, which has an office in Leeds, gave Greggs a “sell” rating.

“We expect Greggs to remain under pressure from four areas: i) declining footfall on the UK highstreet, ii) input price pressures, which may be most keenly felt in 2012, iii) cash-strapped customers iv) intense competition.”