Greggs is looking to phase out its original bakery-style stores as the company moves its 1,698-strong portfolio towards its Series 2 ‘bakery food-on-the-go’ concept.
Greggs reported yesterday that company-managed shop like-for-like sales grew by 4.7% in the year to 2 January 2016.
Total sales grew to £835.7m in 2015, up 5.2% on a comparable 52 week basis and up 3.7% when compared to the 53 week financial year in 2014. Operating profit (before exceptional items in 2014) grew by 25.9% to £73.1m and pre-tax profit (before exceptional items in 2014) grew by 25.4% to £73m.
Greggs also flagged in its investor presentation that it was moving to phase out its remaining 308 stores currently in its ‘Bakery’ format.
The remaining portfolio includes 654 stores in the Series 1 Food On-the-Go format and 736 in the Series 2 Bakery Food On-the-Go format.
Of the 308 stores which currently remain in its Bakery format, 119 are due to relocate or close and 189 are due to be refit by the end of 2016.
Greggs finance director Richard Hutton told M&C that some of the 119 stores were “in the wrong location” and would have to be relocated within the same catchment or be closed altogether “because they’re in a catchment that we don’t want to be in for the longer term”.
“We are looking to be broadly out of the bakery format by the end of this year and then from that point we’ll have the majority of our shops in the Bakery Food on The Go Series 2 colours,” he said.
“We will after this year start to work on bringing Series 1 up to the standard of Series 2 – it works on about a seven-year cycle.
The move away from the bakery format “reflects the change in the business over the years”, Hutton said.
“Greggs was a retail baker – that was the majority of what we sold – these days it’s very much in the food on-the-go sector and you need a different store layout.
“The big change is really the way the store is opened up, there’s much more space in it and a lot more self-selection rather than service.”
Yesterday’s preliminary result was received positively by investors, Hutton said.
“If you look at the share price, it’s moved up about 15% so I think investors were reassured by our strong financial performance last year, they can see the growth potential of the business and that we are investing behind that in terms of putting the supply chain infrastructure in place for growth beyond 2000 shops in the UK.”
On the group’s plan to close three of its 12 bakeries. Hutton said: “It’s not an easy decision, but we know it’s right because it then frees us up to invest in the remainder of the supply chain.”
The vast majority of the affected 355 staff were told of their planned redundancies yesterday morning, Hutton said.
“That’s one of the problems of being a public company – if you’ve got something price-sensitive to announce you have to do it in a very controlled way.
“At the same time as we were announcing the results, Roger our chief executive was standing in front of a group of affected people at our Twickenham bakery.
“He was impressed by how they took the news, it was obviously a shock to them by they understood the logic.”
Hutton also said Greggs had seen a big shift to customers buying into the company’s Balanced Choice range and it now accounted for 10% of total sales.
“That’s something that we’ll carry on investing in and broadening the range on because it’s clearly in-line with current trends.”
