Greggs reports 4.7% sales growth but LFL managed sites falter

Greggs has reported total sales for the 18 weeks to 5 May 2018 grew by 4.7% and like-for-like sales in company-managed shops grew by 1.3% over the same period.

At the firm's preliminary results presentation on 27 February, it reported a good start to 2018, with company-managed shop like-for-like sales growth of 3.2% in the first eight weeks of the year.

However, in the period that followed, market data confirms weak customer footfall in retail locations, which has impacted demand for food-on-the-go. The impact was especially significant in the weeks of severe weather when many shops, including the group's own, could not be opened.

The combination of these factors, along with its strong comparative performance in the same period of 2017, has made for a challenging trading environment throughout March and April. Average transaction values continued to grow but it saw a reduction in like-for-like transaction numbers.

Customers continue to recognise the quality and value of our £2 breakfast offer, with Greggs recently recognised as Britain’s favourite for bacon rolls. The hot food offering is another area of growing customer demand, providing food-on-the-go options for all times of the day.

Sales of healthier options continue to grow as Greggs extends the menu choice. The brand recently launched two new salads for the summer, Feta and Beetroot Dip with Grains & Lemon and Herb Chicken with Roasted Vegetables and Grains. A range of new snack pots have been added to the menu and the firm also launched the first Balanced Choice sweet option, a Belgian Chocolate Pot.

In the first 18 weeks, the group completed 36 shop refurbishments and opened 41 new shops, including 14 franchised units in transport locations. It closed 12 shops, giving a total of 1,883 shops trading at 5 May (comprising 1,669 company-managed shops and 212 franchised units).

New shop openings remain focused on increasing the Greggs brand’s reach into new food-on-the-go locations and the relocation of existing shops. In recent weeks, there have been a number of high profile openings including Westminster Tube station, Birmingham New Street station, Glasgow Buchanan bus terminal and East Midlands airport.

Greggs stated it is making good progress with the investments in its supply sites, that will consolidate manufacturing operations and extend its distribution capacity to support further growth in shop numbers. Work is under way at sites in Leeds, Newcastle and Manchester and planning is well advanced for work that will commence in the second half of 2018 at other sites.

Looking ahead, sales in May have started more strongly than Greggs experienced throughout March and April, however given the uncertainties over market footfall, it is cautious in respect of the outlook for sales in the balance of the year.

The group said it is well positioned to compete for sales in the months ahead with the launch of its new summer menu, featuring new sandwiches and salads, and the brand will be extending the offer of value meal deals. Costs are being controlled tightly with food input cost inflation easing in line with expectations, and the firm expects this trend to continue.

Taking into account trading conditions in the year to date, and Greggs more cautious outlook, the group currently believes that underlying profits for the year are likely to be at a similar level to last year.