Greggs sales surge as meal deals tickle the taste buds

The Newcastle-based firm has also revamped shops, opened more outlets, and launched products such as a range of doughnuts, heavily marketed using social media.

The company, which has more than 1,500 stores, said yesterday that like-for-like sales increased 0.8 per cent in the 13 weeks to 1 October, up from 0.4 per cent in the previous six months.

Greggs said its promotions were proving popular in the current economic climate. It has also sold more than 1.4 million “Superstar Doughnuts” since it introduced the range five weeks ago. Sales were driven by the popularity of the doughnut range among Greggs’ 280,000 Facebook followers.

The bakery chain began selling breakfast products alongside its more traditional pies and pasties about a year and a half ago, and pain au chocolats, porridge and coffee are now among its best selling items.

Sales of coffee were up 18 per cent to 12 million cups so far this year after it rolled out freshly ground beans to all its stores, while sales of bacon and sausage rolls are up more than a third, with ten million sold so far this year.

Chief executive Ken McMeikan said: “We have received a lot of feedback that customers were finding life tough so we have invested more in promotions and range innovation.”

He admitted investment in promotions would have a “small impact on margins” but added it was the right thing to do to help customers.

There were some “encouraging signs” that recent hikes in inflation may be easing, he said, with a good wheat harvest set to help the price of flour although this may be offset by rising sugar prices.

McMeikan still expects the price of goods to rise in 2012, but at a lower pace than in 2011.

Greggs is continuing to roll out new stores and refurbish existing ones. Net new store openings stand at 53 so far this year, which helped total sales grow by 5.4 per cent in the third quarter, compared to the same period in 2010.

The firm said it remains on track to achieve its target of opening around 80 new shops and completing 160 refurbishments this year.

It sees scope for at least 2,000 outlets in the UK.

The company is also trialling a new cafe-style store in Newcastle, called Greggs Moment, which offers gourmet square pies and deli-style sandwiches.

McMeikan said Greggs was watching the store closely and thinks it has potential to take business from the big coffee chains by offering cheaper prices.

In a further diversification, Greggs said it would start selling in more than 700 Iceland stores, following a successful trial.

Analyst Darren Shirley, at Shore Capital, said the trading update from Greggs was encouraging.

“Such a performance demonstrates that the dip into negative trading through May was a blip, and that the momentum in revenue growth from the combined effect of new store openings, store refurbishments, category management and product innovation continues to build,” he said.

He also noted that the soft commercial property market meant the bakery chain was getting increasingly favourable terms as it expands its estate.

Shirley retained his estimate for 2011 pre-tax profits at £52.3 million, as the extra sales have probably been achieved at the expense of the company’s margin.

Shares in Greggs were up nearly 5 per cent yesterday at 483.2p.