Greggs serves up healthy sales hike

The 1,900-strong chain has seen strong demand for breakfast items. Picture: Greggs
The 1,900-strong chain has seen strong demand for breakfast items. Picture: Greggs
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Greggs has served up a rise in sales after focaccia-style pizzas and a summer drinks range helped the bakery chain fight a choppy trading backdrop.

The group, which has more than 1,900 outlets across the UK, said like-for-like sales lifted 3.2 per cent across its own-managed shops during the 13 weeks to 29 September, while total sales rose 7.3 per cent thanks to openings. This marks a pick-up since its first half, when sales edged 1.5 per cent higher.

The group said profit margins were hit at the start of the summer quarter by the volatile sales patterns, although this was offset by improved trading since the start of September.

In a trading update, Greggs told investors: “We were pleased with our trading performance during a period that included a long spell of hot weather, which made sales patterns more difficult to predict.”

The third-quarter performance means comparable store sales are now 2.1 per cent higher in the year to date, with total sales up 5.9 per cent.

Greggs said it remains on track for full-year forecasts, with new autumn ranges including a Pumpkin Spice Latte and Chilli Beef Bake.

It has opened 93 additional stores in its financial year so far, including 35 franchised outlets largely at transport locations, while closing 35 shops.

The group plans to open 100 net new stores over the year, having recently pegged back its expectations from a previous target for 130 branches.

John Moore, senior investment manager at Brewin Dolphin, said: “It hasn’t been an easy period for Greggs. The uncharacteristically hot summer was a natural disruption to its core bakery offering, making sales patterns difficult to predict, but the flexibility of the business meant that breakfasts and soft drink sales mostly took up much of the slack.

“These resilient results demonstrate why Greggs is so popular with shoppers and investors alike – total and like-for-like sales grew 7.3 per cent and 3.2 per cent, respectively, and new products are doing well.

“Although the weather meant a lower-than-usual trading margin due to the mix of sales and unexpected raw material price increases, investors can take encouragement that expectations for the full year remain in line with guidance.”

Darren Shirley, retail analyst at Shore Capital, said the firm had delivered a “robust” trading update despite an unusually hot summer “which historically has proved to be a major trading headwind for the group”.

He added: “New store openings appear in in-line with expectations, with 93 opened year to date (including 35 franchised sites), 35 sites have closed. Management continue to expect circa-100 net openings in the year, with 60 being with franchise partners.

“Greggs continues to invest significantly in its supply chain, with new consolidated manufacturing platforms at Newcastle, Leeds and Manchester sites expected to be commissioned in [the fourth quarter].”

The brokerage said it was leaving its pre-tax profit forecast unchanged at £81.3 million for the full year, with earnings per share of 63p.

Shore Capital also reiterated its “hold” stance on the shares.