Greggs embarks on strategic refocus for profit growth
Greggs the baker will not be building a second savoury factory in the East Midlands and instead will be focusing on like-for-like (LFL) sales and food to go.
The Newcastle-based company has revealed various plans in its interim results and strategy update for the 26 weeks ending 29 June. Greggs, which has 1,690 shops across the UK, said its total group sales were up 3.4% to £362m, but said its LFL own-shop sales were down by 2.9%, which knocked pre-tax profit down by £4.6m on last year to £11.4m.
Chief executive Roger Whiteside said in a statement: “Greggs is a strong brand that has the ability to grow shareholder value over the long term. Our focus for the future will be on winning in the growing food-on-the-go market.”
He also explained there had been a consumer shift towards the ‘food-on-the-go’ sector, which he said was a £6bn market, growing at 9% annually. “While Greggs has defended its position as the leading retail bakery business, it has underperformed the food-on-the-go market, as new entrants and existing competitors have rapidly expanded shop numbers and better met customer demands,” Whiteside added.
The company’s venture into new markets, such as ‘Bake at Home’ and its coffee shop chain Greggs Moment, appear to have underwhelmed expectations. As a result, Greggs said it will not be extending its Bake at Home range with Iceland, but did say relations with the discounter would continue. The coffee shop brand will be “wherever possible, [moved] back into the core Greggs estate”.
Meanwhile, Shore Capital city analyst Darren Shirley said tough trading conditions had led to “further downgrades” from Shore Capital. Shirley also noted management’s new strategy to take the group forward, “which will see a significant retrenchment in new store openings (20-30 planned for 2013), with a focus on improving the existing estate around a single bakery food-on-the-go format”.
Greggs also announced it planned to invest £25m into the business over the next five years and hoped to yield £38m from this in business benefits.
Whiteside said: “We will spend the next two to three years reshaping the business as we build the platform for long-term sustainable profit growth for the benefit of shareholders, employees and the wider community.”
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