High-street chain Greggs plans to ramp up shop openings over the year ahead, after a solid performance in 2017 despite sales growth slowing over the Christmas season.
The group said like-for-like sales rose 3.7 per cent last year, but growth slowed to 3 per cent in the final three months as it came up against tough comparisons from a strong performance the previous Christmas. It marked a slowdown from growth of 5 per cent in the third quarter.
Greggs chief executive Roger Whiteside said: “We finished 2017 well, delivering our 17th consecutive quarter of like-for-like sales growth, and anticipate that we will report full-year results for 2017 in line with our previous expectations.”
He added that 2018 “will be a record year for investment in our supply chain and we intend to increase the rate of new shop openings as we continue to grow Greggs as a leading food-on-the-go brand”.
The firm aims to open between 110 and 130 shops on a net basis over the year. This comes after it grew its estate to 1,854 in 2017, having opened 131 shops and closed 41.
But the group cautioned that cost pressures will continue over 2018, albeit at a slower rate than in 2017, when retailers were hit by inflation from the weak pound, soaring business rates and higher wage costs.
Greggs also said its classic favourites performed well in the final three months of 2017, while it also added Christmas specials such as its festive bake and fresh-baked mince pies.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “The Greggs machine continues to roll. That the group is still driving steady like-for-like sales growth from the existing estate is hugely impressive, as is the ability to open new stores without cannibalising significant numbers of existing customers.”
Hyett also praised the ongoing investment in Greggs’ supply chain, with the business saying it made progress at the end of the year, testing new systems and commissioning a new national manufacturing facility for the production of small cakes and muffins at its Leeds site.
It also aims to continue with refurbishments, revamping around 100 shops over 2018.
Hyett added: “It would have been tempting to fatten up the store estate without investing in the necessary infrastructure to support it. Greggs avoided those potential growing pains, while maintaining the vertical integration that makes it unique. The group expects to continue that trend for some years yet.
“The ongoing expansion has delivered great results for investors over several decades now – an ardent Greggs fan who invested £1,000 when the group first listed on the market back in 1984 would today have enough money to binge on around 276,244 of Greggs’ famous sausage rolls. A very healthy return.”
Also commenting was Darren Shirley of Shore Capital Markets. He said Greggs issued a “solid” trading update for the fourth quarter.
“With management stating that results are anticipated to be ‘in line with’ previous expectations we once again leave our [2017 full-year] forecasts unchanged.” These include current pre-tax profit of £82.6 million and earnings per share of 63.6p, “so year-on-year growth of 7.6 per cent”.