Greggs, the c1,600-strong high street bakery and café operator, has reported a 2.3% decline in like-for-like sales for the 26 weeks ended 30 June 2012, as record levels of rainfall impacted high street footfall outweighing the effect of the publicity from the “pasty tax” affair.
The company said like-for-like sales fell 3.5% in the second quarter due to the wet weather. It said that conditions for consumers were likely to remain challenging in the second half, but remained confident in its ability to deliver long-term profitable growth.
Total group sales for the six months increased by 4.5% to £350m (2011: £335 million), which it said reflected the good performance from its new shop opening programme and strong growth in wholesale volumes.
Operating profit excluding exceptional items fell £0.8m to £16.5m (2011: £17.3m), while net operating margin stood at 4.7% (2011: 5.2%). Pre-tax profit excluding exceptional items was £16.5m down from £17.3m in 2011. It declared an interim dividend of 6.0p per share (2011: 5.8p), an increase of 3.4%.
Greggs opened 39 new shops during the first half and closed six, making a net increase of 33 shops and giving the group a total of 1,604 shops at 30 June 2012. It said that its opening programme will accelerate during the second half of the year and that it has a strong pipeline of new shops coming through, putting it comfortably on track to meet its target of 90 new shops, net of closures, over the year as a whole.
The group said that it plans for new formats are progressing well as it develops different types of shops for different locations and occasions.
It now has four Greggs Moment coffee shops trading and a fifth shop opening on 9 August in Gateshead. In June, the chain opened its newest concept shop "Greggs the Bakery" in Newcastle upon Tyne, which it said gives customers a more traditional baker's shop experience, offering 75 new lines including a wide range of artisan breads and "made to order" sandwiches alongside our best-loved products.
The company said it was encouraged by the early performance of both Greggs Moment and Greggs the Bakery.
Its plans to refurbish 100-120 of its existing shops during the year are on track with 64 completed and “performing well” in the first half.
During the period the group opened two franchised Greggs shops under its partnership with Moto Hospitality. It said that this trial had been very successful and it was commencing the roll out of franchised Greggs shops to a further 28 Moto motorway service stations across the UK creating an additional 500 jobs.
Capital expenditure during the first half was £19.2m (2011: £31.4m), a significant reduction that the company said reflected the lower level of supply chain investment in the current year. It said that its main focus of investment in 2012 is the opening and refurbishment of shops.
The Group remains cash generative and financially robust. At the end of the half year we had net cash on the balance sheet of £1.8 million (2011: £8.8 million) with the reduction largely reflecting the increased working capital requirements of wholesaling.
The group announced two new appointments to its operating board with Gavin Kirk joining Mars as supply chain operations director and David Sheehan set to join later this year as estates director after eight years as store development director with Sainsbury’s.
In April, the group increased its sales through Iceland Foods by making a range of nine frozen products available in more than 750 Iceland stores. This range is targeted at the "bake at home" market, in which the business was not previously represented. It said that sales have performed “very strongly” and are already making a contribution to profits.
Earlier this year, chief executive Ken McMeikan spearheaded a fightback against Chancellor George Osborne’s plans to extend the 20% VAT tax to its pasties and sausage rolls when he marched on Downing Street to deliver a 300,000 strong petition from angry customers, eventually winning a u-turn on the plans.
McMeikan said: “Conditions for consumers are likely to remain challenging in the second half and we will therefore continue our focus on delivering outstanding value for our customers. In addition we will make the Greggs brand more accessible to new customers through our shop opening programme and further development of our wholesaling and franchising channels.
“There are some signs of future increases in global food ingredient costs; however we are largely covered against this for the remainder of 2012. Overall we expect second half margins to be in line with the same period in 2011.
“We continue to make strong progress towards our strategic goals and remain confident in our ability to deliver long term profitable growth for the benefit of shareholders, employees and the wider community.”
