Anxiety from Greggs over outlook after '˜strong' results

Food retailer Greggs has seen sales and profit rise in 2016 as it adapts its offering to suit demand, but said the consumer outlook in the UK is 'more challenging than we have seen in recent years'.
Greggs warned of an increasing squeeze amid rising inflation. Picture: ContributedGreggs warned of an increasing squeeze amid rising inflation. Picture: Contributed
Greggs warned of an increasing squeeze amid rising inflation. Picture: Contributed

The FTSE 250 company, which has about 220 shops in Scotland and is known for products including sausage rolls and steak bakes, said pre-tax profit increased to £75.1 million from £73m in the year.

Total sales showed a 7 per cent year-on-year increase to reach £894.2m while company-managed shop like-for-like sales were up 4.2 per cent.

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Greggs sales boosted by demand for healthier snacks
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It also said sales of healthier food, such as salads and yoghurts, overtook the £100m mark and now make up a tenth of all revenue.

The Newcastle-based company said that in the period it refurbished 208 shops and had 1,764 trading at 31 December. Furthermore, 92 per cent of its network has now been adapted to offer its food-on-the-go format.

Chief executive Roger Whiteside said: “In 2016 we delivered another strong performance as we continued on our journey to transform Greggs from a traditional bakery business into a modern, attractive food-on-the-go retailer.

“Our product offer is evolving to meet the changing needs of our customers and our shop estate and service levels have benefited from significant investment.”

But he echoed the concerns of many businesses when he said the UK consumer outlook “is more challenging than we have seen in recent years, with industry-wide pressures emerging in commodities as well as labour costs”.

The firm added that in the short term it faces “a period of greater economic uncertainty and increased pressure from cost inflation”.

However, Whiteside said 2017 has kicked off in line with its expectations, and is “confident of making further progress as we implement our plan to grow Greggs as a contemporary food-on-the-go brand”, with company-managed shop like-for-like sales in the eight weeks to 25 February up by 2 per cent, and total sales up 5.8 per cent.

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Such growth prompted analyst Darren Shirley of Shore Capital to say that Greggs is consequently “a little ahead of our expectations at this still-early stage of the year”.

He added that Greggs’ 2016 preliminary results came in “very much as expected”, with net cash at the period-end of £46m higher than its forecast of £34.2m, and Shore Capital was making no changes to its profit forecasts as a result of yesterday’s update.