Tuesday, March 26, 2019

Greggs issues profit warning


High street bakery retailer Greggs has today issued a profit warning after bad weather led to a like-for-like (LFL) sales decline in its first quarter.

In the 17 weeks to April 27th 2013, LFL sales in own shops fell 4.4 per cent, impacted by “adverse weather in January and March”, the retailer said, warning that tough conditions on the high street are likely to damage profitability in the months ahead.

A statement from the retailer said: “LFL sales in our own shops were particularly impacted by adverse weather in January and March.

“The most recent two weeks indicate an underlying rate of like-for-like decline of around 1.5 per cent reflecting in part the beginning of the weaker comparisons seen last year.

“We are continuing to experience lower footfall across much of the estate although average transaction values have increased marginally.

“Our new shop openings remain focused on locations that have been less impacted by lower footfall such as workplaces, travel and leisure destinations.

“With the consumer remaining under pressure sales of promotional deals have been particularly strong with a slight impact on margin and we expect this trend to continue.

“Despite good cost control overall profits have been affected in the first quarter of the year and are behind our plan and last year.

“The business remains highly cash-generative and maintains a strong balance sheet position.”

Over the quarter, Greggs, which appointed ex-Punch Taverns chief Roger Whiteside at its new CEO in January this year, opened 18 new stores including half a dozen franchise units with Moto, representing a net addition of 10 stores after eight closures.

Greggs now has 16 shops under license by Moto in their motorway services and also completed 59 shop refurbishments over the period, in line with plans as part of its turnaround strategy to refit some 250 stores during this financial year.

Development of its wholesale channel is also a focal point for the baking specialist, which has extended its Greggs-branded ‘Bake at Home‘ range in Iceland Foods in recent weeks, though these growth opportunities have done little to improve margins.

“We do not expect a significant improvement in the difficult underlying market conditions in the short term,” the statement continued.

“The business is focused on continuing with our plans to invest in core sales performance whilst taking action to reduce costs.

“Although we are only four months into the year, based on current own shop like-for-like performance we believe that profits for the year are likely to be slightly below the lower end of the range of market expectations.”