Greggs: good start to 2020 but storms bring headwinds

Greggs has reported a “very strong start” to the year – but sales have since been hit by storms that battered the country in recent weeks.

The business today (3 March) confirmed full-year figures announced in a trading update last month, with total sales up 13.5% to £1,167.9m, and pre-tax profit excluding exceptional items up 27.2% to £114.2m. This prompted Greggs to share a £7m bonus among its 25,000 staff following what the company described as an “exceptional financial” year.

Reporting on performance so far in 2020, Greggs said January got off to a very strong start, but the February storms brought a “significant” impact on sales growth.

“The flooding that resulted from the storms temporarily closed our supply site in Treforest, South Wales, and our teams there and across the business have done a terrific job in re-establishing operations,” said chief executive Roger Whiteside.

Overall, sales in company-managed shops grew 7.5% on a like-for-like basis in the first nine weeks of 2020, with total sales up 11.7%.

Whiteside said the company’s performance in 2019 had been driven by Gregg’s multi-year strategic investment programme, which has transformed the business’s production and logistics operations.

Looking ahead, the company is to build an automated frozen distribution facility at its Balliol Park distribution centre in Newcastle to increase productivity and reduce Gregg’s reliance on third-party providers.

“As our warehousing operations become less dependent on in-time production, further efficiency gains become obtainable in our picking and logistics operation, reducing space requirements and opening up shop delivery windows,” stated the company.

Plans to increase capacity at Balliol Park are being brought forward as a result of strong growth in the business, with work beginning this year on further automation of existing production lines while planning construction of an additional line.

Greggs is also starting trials of full ingredient labelling on shop-produced sandwiches in the first half of this year, which it said would require “significant changes to our in-shop sandwich-making processes”. It added that growth in demand for gluten-free and vegan lines will require operational changes throughout its supply chain and shop activities.

Whiteside said cost increases are likely to present a stronger-than-normal headwind in 2020, with wages and pork prices driving cost inflation.

“We intend to invest some of the margin generated by our strong performance in 2019 to protect customers from these costs,” he added.

“Demand for food-on-the-go continues to grow and we are investing in opportunities to develop further market share. Nevertheless, there is some uncertainty in the outlook, particularly given the potential impact of Coronavirus.

“This aside, we expect to make year-on-year progress and will do so from a strong financial position, supporting our investment for further growth whilst also delivering good returns for all stakeholders. Our expectations for the year remain unchanged.”

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