Comment: Old favourites defending UK high street

Martin FlanaganMartin Flanagan
Martin Flanagan
IT’S good to see that the whole of the bricks-and-mortar high street is not being plundered by either the internet competition or discounter supermarkets. Bakery chain Greggs and Carpetright, the UK’s biggest floor coverings retailer, have both cheered the market with positive trading updates that saw their shares rise strongly yesterday.

Greggs is probably the more impressive of the two. It has benefited strongly from improvement in product, packaging, merchandising and stores, and including seating in its stores over the past year or more.

The group, with its plain and hearty fare of pies, pastries, sandwiches and cakes, is never going to be one for the epicures.

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But Greggs has got back to doing the plain things well, and also benefits tangentially from many Britons’ comfort with eating on the move.

New boss Roger Whiteside and his team have been rewarded with a leap in same-floorspace sales to more than 5 per cent in the past 24 weeks, putting the retailer on track for full-year like-for-like sales up 4.2 per cent. This compares with a fall of 1.1 per cent in underlying sales in a difficult 2013.

Greggs is always something of a hostage to fortune when it comes to the winter weather, which tends to discourage the passing footfall at its stores that is its lifeblood.

But wild card maverick climate factors aside, the group is regaining a reputation for surprising on the upside with its trading updates, and yesterday’s numbers were well ahead of City estimates.

The company had an extended time in the doldrums when the basic offer felt jaded and out of time with the prevailing food takeaway environment.

It turnaround so far has been impressive. Greggs benefits from a largely stable fixed cost base, meaning that in good times extra revenues should fall straight to the bottom line.

That is helped by its benign input costs currently, ranging from flour and pork to oil. All in all, the shares still look palatable at current levels.

Farther along the high street, Carpet-right, after a string of recent profit warnings, is beginning something of a fight back of its own. The retailer said yesterday that it expected full-year profit to be at the upper end of market forecasts after trading was up in the UK and overseas.

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Underlying profits more than doubled to £6.7 million at the halfway stage, while the decision by Carpet-right to take the hit to the profit margin chin because of a raft of price promotions saw underlying sales grow 6.5 per cent in the latest period. Even the troubled mainland Europe division is back in the black again.

Carpetright’s stock is still down heavily on the year, but the outlook looks better than for quite a while.

Osborne may not give a dram for duty cut

The Scotch whisky industry wants a 2 per cent cut in duty for wine and spirits. “Thanks, but… “ could sum up the Scotch Whisky Association’s reception of George Osborne’s scrapping of the alcohol duty escalator – automatically raising alcohol taxes by 2 per cent above inflation annually – in his last Budget.

The SWA’s contention is the Chancellor has accepted the intellectual argument that whisky and other spirits are over-taxed by binning the disliked escalator; so why not go the extra distillery mile, and not just freeze the duty burden, but reduce it, it wonders.

The industry has a case but is, I suspect, whistling in the wind.


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