Bakery’s rise in sales failed to translate into growing profits
CUSTOMERS BUYING VALUE FOOD AS COST OF LIVING CRISIS BITES
NEWCASTLE bakery chain Greggs says the cost-of-living squeeze is drawing customers to its value meals – but rising sales have not translated into growing profits.
The company has posted half-year figures in which sales rose 27% to £694.5m, compared with £546.2m a year earlier.
But half-year profits remained largely flat year-on-year at £55.8m because of the re-introduction of business rates, an increase in VAT and higher levels of cost inflation.
With soaring inflation putting a strain on people’s incomes, consumers are more likely to turn to lowercost food and drink while on the go, Greggs said.
In May the company made 5p or 10p increases on some items but CEO Roisin Currie said the firm hasn’t decided on making more increases, instead saying Greggs will be monitoring the situation. She said: “We know the economic environment is challenging and it is tough out there for our customers, so we are doing everything we can to protect our price proposition.
“We are not immune to cost inflation but we are trying hard to mitigate against it impacting customers.”
The chain, which has more than 2,200 shops in the UK, also said it plans to extend its opening hours, shake up its menu options and offer more delivery services in order to gain more evening sales.
Greggs opened 70 new shops during the period and expects to have 150 net new shop openings over the course of the year. Its 400th franchised shop opened in Selby in partnership with its newest franchise partner, Rontec, one of the leading players in the UK forecourt industry.
Other notable shop openings included three drive-thru sites and the world’s largest in-store café in Primark Birmingham. Two weeks ago it opened shops in London’s Leicester Square and Liverpool Street Station.
It said moves to open many of its shops into the evening was “going well”, while deliveries were increasing.
It added it was increasing its healthy food choices with the launch of two salad meal boxes and was also adding two pizza flavours, Mexican chicken and pepperoni hot shot.
Ms Currie said: “Greggs delivered an encouraging performance in the first half of the year with sales ahead of 2019 levels.
“These results demonstrate the continued strength of the Greggs brand and demand for our great tasting, quality and value for money offering.
“During the period we continued to make good progress with our strategic priorities, including expanding our shop estate and making Greggs more accessible to customers through extended trading hours and digital channels.
“In a market where consumer incomes are under pressure, Greggs offers exceptional value for customers looking for food and drink on-the-go.
“We are well positioned to navigate the widely publicised challenges affecting the economy and continue to have a number of exciting growth opportunities ahead, with a clear strategy for expansion. We remain confident in Greggs’ ability to deliver continued success.”
Greggs recently announced a second collaboration with Primark that will see a new fashion collection go on sale this week, with expectations high that it will sell out, thanks to its cult following. Ms Currie praised the firm’s marketing team for its hard work to help make Greggs an “iconic”, muchloved brand. She said: “Our teams do extremely well to link up with other brands. We talk about how we punch above our weight in terms of our messaging to customers, and that’s something we need to continue to do.”
Greggs also announced it had appointed former Tesco CEO Matt Davies as an independent non-executive director and he would succeed Ian Durant as chair of the board in November.