Greggs sees less shoppers on high street

The UK’s biggest seller of food-on-the-go, said annual pre-tax profits are likely to be “slightly below” the lower end of market expectations of £47.5m to £55.2m.

High street footfall has fallen in the first few months of 2013 as cash-strapped shoppers stay at home more rather than go out shopping. Many of Greggs’ shoppers buy food when they pass the shop rather than view it as a destination in its own right.

The group sells bread, sandwiches, savouries, cakes and pastries to over six million customers a week and has a low average transaction value of just over £2.

New chief executive Roger Whiteside said: “Essentially, we’ve seen lower customer footfall across much of the estate. We are seeing fewer customers out shopping and as a consequence food sales are under pressure.

“We see no real sign of significant improvement in this underlying trend in the short term.”

The rise of internet shopping was also blamed for the dwindling number of consumers picking up pasties and sausage rolls at stores in town centres and retail parks.

“There is a growing trend to shop on the internet and that is restricting the number of people going shopping,” said Mr White-side.

“Compounding that is that consumer income remains under pressure and people are trying to save money.”

The chain was badly hit by the freezing weather at the start of the year, but while its performance has picked up since then it continues to be down year-on-year.

The company, which has 1,681 shops, is hoping to appeal to more customers by opening shops at workplaces, retail and industrial parks, motorway service stations and travel hubs, rather than traditional high street locations.

“We are opening stores where people live, work or travel,” said Mr Whiteside, a former chief executive of pubs group Punch Taverns.

“Over half of new stores were in these locations last year, not the high street. This year 75 per cent of new stores will be in these sort of places.”

He added that the group is not turning its back on the high street.

“There will be net expansion on the high street. Most of our shops – most of our best shops – are on the high street.”

This year it will open 80 new stores and close 30 underperforming sites.

It said it is on course to refurbish 250 sites after completing 59 so far this year and it plans to boost its menu with new products such as a ‘spicy chicken fajita’.

Greggs said like-for-like sales fell 4.4 per cent in the 17 weeks to April 27, particularly hit by the bad weather in January and March.

The most recent two weeks showed an improvement with sales down by 1.5 per cent.

Mr Whiteside said customers may be suffering from the economy “bumping along the bottom” for some time.

“Successive years of being under pressure have meant ultimately something has to give and they are having to adjust their budgets accordingly,” he said.

Greggs reported a more noticeable pattern of consumers spending after pay day before cutting back when they ran out of money towards the end of the month.

Promotions such as breakfast and lunch deals performed well, but had a slight impact on margins, a trend that is expected to continue.

The group said “promiscuous” consumers are hunting for the best value.

Total sales in the period rose by 3.0 per cent, driven by a net 10 new shop openings and a 2.9 per cent increase in wholesale and franchise sales.

Panmure Gordon analyst Philip Dorgan said: “We think that lower footfall on the high street is structural and that Greggs needs to re-focus its business faster than it currently plans.”

Last month Mr Whiteside said the firm was sprucing up its stores to persuade cash-strapped shoppers to visit. So far this year it has refitted 59, in line with a plan to do around 250.

“There are fewer customers about shopping. What we’ve got to do is attract more of those customers to Greggs,” he said.

The refurbishment will give customers more space for browsing.