Bakery chain Greggs reinstates divi and aims to see branch network rise

Greggs has said it plans to open around 100 stores by the end of the year after a rebound in sales helped return the chain to profit.

The high-street bakery business said it has an opportunity to grow to 3,000 branches as it struck an ambitious tone after withstanding the impact of the pandemic.

It told investors that the recovery in trade in recent months was "stronger than we had anticipated" as it saw strong trade in suburban areas and local high streets. The group has also targeted growth areas such as delivery and drive-through sales after the pandemic weighed on some core trade such as its travel sites.

Greggs said its like-for-like sales for the four weeks to the end of July were 0.4 per cent above the levels it saw in the same period in 2019, before the pandemic struck.

Greggs has experienced a 0.4 per cent year-on-year rise in like-for-like sales for the four weeks to July 31. Picture: contributed.

Its total sales over the half year to June amounted to £546.2 million, compared to £546.3m 12 months previously. The group saw like-for-like sales drop 9.2 per cent against 2019 after the impact of the third national lockdown but it was lifted by the opening of 48 sites.

The chain swung to a £55.5m statutory pre-tax profit from a loss of £65.2m a year ago. It also declared an interim ordinary dividend of 15p per share, coming after the firm last paid a dividend in October 2019.

Greggs had 2,115 locations at the start of July and said it is targeting 100 net openings for the current year, a move expected to create around 500 jobs in the second half of the year.

Greggs' latest results have been described as reflecting its underlying strength as a business. Picture: contributed.

However, the business also said it has “the opportunity to expand its UK estate to at least 3,000 shops".

Chief executive Roger Whiteside said: "Greggs once again showed its resilience in a challenging first half, emerging from the lockdown months in a strong position and rebuilding sales as social restrictions were progressively relaxed.

"Whilst there continue to be general uncertainties in the market, given our recent performance we now expect full-year profit to be slightly ahead of our previous expectation."

Ross Hindle, analyst at Third Bridge, said: “Greggs has been able to punch above its weight in food-to-go because it has had less restriction exposure, and it sells the value products cost-conscious first-returners desire.

Important

"However, compared to its competitors, Greggs continues to suffer from relatively small average transaction values. Our experts expect Greggs to focus on closing this ticket size gap by improving their food range and continuing to promote their coffee offering, an important lure to drive foot-traffic and promote more cross-sell purchases."

John Moore, senior investment manager at Brewin Dolphin, said: “Greggs’ results reflect its underlying strength as a business. The company is feeling the full effect of a ‘return to normal’ along with the benefits of its investment in digital and the adaptations made to its estate to accommodate new customer habits during lockdown.

“The company’s balance sheet is robust and the reinstatement of the dividend is another positive move for shareholders, who have also seen the share price reach record new highs in recent months. There are no doubt challenges ahead – not least in the form of rising inflation – but Greggs is in a very good position, while many of its competitors have not been so fortunate.”

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