Greggs sales recover but profit squeeze continues

A MAJOR revamp of struggling bakery chain Greggs has helped the business stem a sales decline but investors have been told profits will remain under pressure for two years.

Roger Whiteside was encouraged by results. Picture: Robert Perry

Chief executive Roger Whiteside said he was “encouraged” by trading figures showing like-for-like sales dipped 0.5 per cent in the 13 weeks to 28 September, improving on the 2.9 per cent slide in the first half of the year.

A revamped pizza range, a £2 breakfast deal and a new variety of cakes have boosted performance as the group moves away from its traditional bakery format towards the £6 billion “food on the go” market.

Meanwhile, 70 stores are being closed this year as the business shifts outlets from high streets to workplace and transport-focused sites. The Newcastle-based group has already issued two profit warnings this year, but Whiteside said an improving sales pattern returned in August and September, with like-for-like sales up 1 per cent over the eight weeks.

However, he said the costs of investing in the business were likely to constrain profit growth over the next two years.

Whiteside added: “We are encouraged by the recent improvement in like-for-like performance, although with consumer disposable incomes still under pressure we remain cautious.”

He declined to predict when quarterly sales would return to growth as the trading environment remained “fragile”.

“We are having to fight for every penny because people don’t have any more money in their pockets,” he said.

The chief executive said Greggs had “made good progress” developing its new strategy, while store refurbishments and longer opening hours have also had an impact.

The business has completed 141 shop refits so far this year and is on course for 215 by the end of 2013.

Wayne Brown, an analyst at Canaccord Genuity, said the latest figures were an improvement, but the broker maintained its “sell” rating as profits remain under pressure amid the shift into the highly competitive “food on the good” sector.