Greggs’ recipe for success is baked to perfection
GREGGS got 2023 off to a great start with last week’s results showing its tasty treats continue to impress customers and investors alike.
The bakery chain’s like-for-like sales grew 17.1 per cent across the first 19 weeks of the year, with total sales of £609million ringing into the tills.
Chicken goujons and pizzas were among the hot sellers.
The steep growth rate partly reflects the impact of Covid last year, which created a relatively weak comparative period. Because of this, growth rates are expected to ease during the year.
Expansion is also on the cards, with the total number of shops set to rise to 3,000 over the next few years. Relying on high-street shoppers isn’t sustainable, so plans to increase its presence at travel locations – such as train and petrol stations – look wise.
Greggs also intends to increase the number of shops that are franchises from 17 per cent to around 20 per cent.
This move is good because it means the group isn’t on the hook for day-to-day costs at these locations.
Other growth levers are being baked in too. Bolstering delivery and click-and-collect services, as well as opening later, are all ways to attract more customers.
One of Greggs’ key strengths is that it’s a lower-value treat. That offers some protection during the cost-of-living crisis, as last year’s pre-tax profit remained resilient, up 1.9 per cent to £148.3million.
But the group does face challenges. Costs are key so it’s pleasing to hear they are tracking in line with expectations. Having 9-10 per cent cost inflation over 2023 is not an easy hurdle to overcome. But the group made headway in locking in electricity, food and packaging prices.
At the last count, Greggs’ cash position stood at over £190million, meaning it can stomach some disruption. A healthy balance sheet and good cash generation also underpin the rising dividend and investment in growth.
There’s a lot to like about Greggs – literally and corporately. There’s some upside over the long term, but the strong share performance in recent months
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