Store expansion helped total sales at bakery retailer Greggs rise 4.3 per cent over the last quarter, results released today reveal, but its underlying sales have declined over the period.
On a like-for-like basis sales fell 1.8 per cent in the 19 weeks to May 12th 2012, which the company blamed on “exceptionally wet weather” during the last two months.
Any publicity generated for the retailer by the furore caused by the government’s proposed ‘pasty tax’ failed to result in any boost to its trading levels, but the company will hope that its investment in new initiatives will improve revenues during the rest of the year.
Derek Netherton, the Chairman of Greggs, told investors at the retailer’s AGM this morning: “The trading environment for all retailers has remained extremely challenging, and high street footfall has remained relatively weak.
“In addition, we have had six disappointing weeks of trading as a result of the exceptionally wet weather in April and early May. Despite these tough trading conditions we have continued to control our costs tightly which has mitigated some of the impact of the bad weather.”
As many as 20 new stores were launched by Greggs during the period and 42 existing shops were refitted, while the group also opened its second sit-down cafe store under the ‘Greggs moment’ brand.
Other new schemes from the retailer include its first motorway services shop which opened in Cheshire and will be followed by a second at Birch services on the M62 in June, and it has also extended its Greggs-branded frozen bakery goods line in Iceland stores after reportedly strong sales of its sausage roll product.
The mooted ‘pasty tax’ represents a considerable threat to Greggs business model however, with baked items sold in its stores set to be charged full VAT as a ‘hot takeaway food’ whereas before they were exempt.
Savoury sales represent a third of Greggs turnover and as such the company has warned that the introduction of the tax change could have “material impact on our sales and profits”, meaning the business will continue to fight against the new law during its consultation period.
Commenting on Greggs’ general outlook, Netherton added: “We believe consumers’ disposable incomes will remain under pressure from high fuel, energy and food costs, although consumer sentiment could benefit in the months ahead from major national events including the Diamond Jubilee celebrations, the Olympics and the Euro 2012 football championship.
“We will continue to support consumers in these difficult times by driving great value through our meal deals and promotional activity, whilst making Greggs accessible to more new customers through our new shop openings and new channels to market.”