GREGGS plc – the leading bakery food-on-the-go retailer in the UK, with almost 1,700 retail outlets throughout the country – has issued an interim management statement showing good trading in the year to date, and expects ‘satisfactory’ results for the year.
- Total sales in the 17 weeks to 26 April 2014 up 4.0%
- Own shop like-for-like sales in the first 17 weeks up 3.7% (2013: 4.4% decline)
- 66 refits completed
- 20 new shops opened, 28 closures
- Input cost inflation below expectations
- Property gains on disposal £1.4 million (2013 £0.2 million)
Outlook
“Market conditions remain highly competitive but we are encouraged by the performance in the year to date. We have delivered continuing improvement in like-for-like sales, albeit against the weak comparatives of last year, and strong cost control. We have also benefited from property disposal profits and lower than expected input cost inflation. As a result, we expect to deliver a good first half outcome.
“The second half is likely to be more challenging as we come up against relatively stronger sales comparables and likely cost inflation. Overall we expect to deliver satisfactory financial results for the year and good further strategic progress.”
Trading performance
Trading so far this year has been good, continuing the trend seen in the final quarter of 2013. Total sales for the 17 weeks to 26 April 2014 grew by 4.0 per cent. Like-for-like sales in own shops grew by 3.7 per cent over the same period.
Year-on-year performance is in part benefiting from comparison with a period of weak trading in 2013 when like-for-like sales for the first 17 weeks declined by 4.4 per cent, impacted by snow in January and March 2013.
In line with strategy, sales growth is also being driven by improved availability of freshly made sandwiches, longer trading hours and product upgrades such as the improved coffee blend, which is benefiting from inclusion within popular promotional meal deals.
Greggs Rewards, the new mobile loyalty scheme, has started well and continues to build momentum.
Cost control has been strong in the year to date and input cost inflation has been lower than experienced in recent years. As a result there has been some benefit to margin in the period. The business remains highly cash-generative and maintains a strong balance sheet position.
Shops
During the first 17 weeks, 66 shop refurbishments completed in our ‘bakery food-on-the-go’ format, in line with the plan to refit around 200 shops during 2014. These are performing well and the contemporary new look and feel, along with additional facilities such as seating, is being well received by both customers and staff.
20 new shops opened, including 11 franchised units in transport locations. 28 shops closed, giving a total of 1,663 shops trading at 26 April. As a consequence of the accelerated closure programme, a number of freehold properties have been disposed of in the year to date. This has realised property profits of £1.4million (2013 £0.2 million).
Organisational Change
Completed the formal consultation period in respect of proposals to close 79 in-store bakeries and improve operational effectiveness in support areas. The agreed changes in support areas are complete and new structures are in place. The closure of in-store bakeries is on-going and it is anticipated that the majority of these will be completed by the end of this year.
Outlook
Market conditions remain highly competitive but we are encouraged by the performance in the year to date. We have delivered continuing improvement in like-for-like sales, albeit against the weak comparatives of last year, and strong cost control. We have also benefited from property disposal profits and lower than expected input cost inflation. As a result, we expect to deliver a good first half outcome.
The second half is likely to be more challenging as we come up against relatively stronger sales comparables and likely cost inflation. Overall we expect to deliver satisfactory financial results for the year and good further strategic progress.