The group, which has almost 1,700 stores across the UK, also said it has decided not to roll out a network of standalone coffee shops, despite seeing encouraging results from a trial of its “Greggs Moment” brand. Shares closed down 39.3p, or 8.9 per cent, at 402.3p after the profit warning – its second this year.
In a bid to grab a larger slice of the £6 billion “food on the go” market, the chain has extended its opening hours, bringing in teams to make fresh sandwiches earlier and staying open later to cater to the growing trend for afternoon snacking.
However, recent trading has suffered amid the soaring temperatures, and Newcastle-based Greggs said like-for-like sales during the five weeks to 3 August were 3.2 per cent lower than the same period last year as customers clamoured for lower-margin cold drinks rather than pasties and sausage rolls.
Chief executive Roger
Whiteside said the knock to sales means overall profits for the full year will be about £3m lower than previously predicted.
Pre-tax profits fell to £11.4m for the six months to 29 June, down from £16m a year earlier, although total sales grew 3.4 per cent to £362m. The firm generated an annual pre-tax profit of £51.9m in 2012 and yesterday’s warning saw Shore Capital analyst Darren Shirley provisionally downgrade his 2013 profit forecast by 6.5 per cent to £43.5m.
Having decided not to press ahead with the coffee shops, Greggs is also slowing the pace of store openings. During the first half, 37 outlets opened and 18 were closed – a net increase of 19. For the year as a whole, it expects to open about 70 branches and shut between 40 and 50.
Plans to build a second savouries factory in the East Midlands have been axed, and while Greggs said it would continue to supply “bake at home” products to supermarket chain Iceland, it would not be looking to expand its wholesale business.
Whiteside said: “Our focus for the future will be on winning in the growing ‘food on the go’ market. We will spend the next two to three years reshaping the business as we build the platform for long-term, sustainable profit growth.”
The firm will accelerate the refurbishment of existing stores, with between 130 and 150 being revamped in the second half, up from 90 during the first six months, and will invest £25m in its supply chain over the next five years.
Cannacord Genuity analyst Wayne Brown said: “We expect some of this investment is to support the complexities of a ‘food on the go’ concept as opposed to a traditional baker, but we question the depth and breadth of management skill set to manage a very different retail operation.”
The interim dividend, to be paid on 4 October, was held steady at 6p a share.