The group, which recently axed more than 800 jobs as the pandemic ate into its usually busy lunchtime trade, said like-for-like sales fell by nearly a fifth over its fourth quarter to January 2.
In a festive trading update, Greggs said its total sales for the year slumped by nearly a third to £811 million.
The group is braced for annual pre-tax losses of up to £15m, against profits of £108.3m the previous year, though it said the hit was contained thanks to government support. Coronavirus restrictions will keep profits under pressure for another year at least.
The firm, which has more than 2,000 outlets, told investors: “The significant uncertainty over the duration of social restrictions, along with the impact of higher unemployment levels, makes it difficult to predict performance. However, we do not expect that profits will return to pre-Covid levels until 2022 at the earliest.”
The chain has sought to shore up trade by launching a delivery service with Just Eat, which it said accounted for a 5.5 per cent slice of fourth-quarter sales.
It noted that 600 of its shops now provide delivery services to catchments served by Just Eat and this is expected to increase to around 800 shops this year.
The group also confirmed it still hopes to open around 100 new stores, on a net basis, over the year ahead.
Susannah Streeter, senior investment and markets analyst at financial services firm Hargreaves Lansdown, said: “The pandemic has taken a big bite out of Greggs sales. There is light at the end of the tunnel but it’s a long way to go and Greggs doesn’t expect a return to pre-Covid levels of operations until 2022 at the earliest.
“The easing of restrictions and increase in footfall in town centres during the late summer and early autumn helped shops bring home the bacon once more, but fresh lockdowns saw sales crumble again.
“Greggs has adapted its operations to keep up with the nation’s appetite by rolling out click and collect and through a partnership with Just Eat, but home deliveries accounted for 5.5 per cent of shop sales, not fully offsetting the overall decline in in-store business.”
Freetrade analyst David Kimberley noted: “The partnership with Just Eat may bring some solace but it’s likely to be too little too late in the eyes of many investors.
“More positive is the prospect of new shop openings and the development of drive-through sites, the latter of which seem set to become big money makers in the next couple of years.”
Chief executive Roger Whiteside said: “With customers spending more time at home we have successfully developed our partnership with Just Eat to offer delivery services and have also seen strong sales through our longstanding partnership with Iceland, offering our products for home baking.
“We have resumed opening new shops where we see good opportunities, with those sites accessed by car performing particularly well.
“In light of the recent government announcements, significant uncertainties remain in the near-term.”