Greggs says it could make 410 redundancies by decommissioning in-store bakeries and restructuring its management and support teams, which it says could save the company £6m per year from 2015.
It comes as the firm reports a 2.6% rise in like-for-like sales in the three months to 28 December, accelerating to 3.1% over the festive period. Total sales in the Christmas and New Year period (five weeks to 4 January) increased 4.8%. The growth in like-for-likes compares to a 2.9% decline in like-for-likes across the festive period in the previous year.
Across the year to 28 December, like-for-likes declined 0.8%, “reflecting the difficult trading conditions earlier in the year”, and total sales were up 3.8%. The company undertook a record 216 refits in the year.
Improved like-for-like growth in Q4 was “in part driven by the investment in product initiatives and customer service that support our ‘Bakery-food-on-the-go’ proposition”.
Reflecting on Christmas trading, the company said: “We enjoyed strong demand for our core food-on-the-go products over the Christmas period with growth in sales of sandwiches, savouries, sweet bakery and drinks. We also introduced a limited range of Christmas favourites, including our famous Festive Bakes and award winning sweet mince pies, which sold well.”
Greggs has proposed structural changes to reduce overhead costs across two areas. The first would involve decommissioning in-store bakeries across the estate that could see 300 roles becoming redundant.
The company said: “The vast majority of our shops are supplied with fresh products from our regional bakery network. As a legacy from earlier business acquisitions there are 79 shops remaining where we currently operate in-store bakeries. It is more efficient to supply our shops from regional bakeries and therefore over the next 12-18 months it is proposed that the remaining shops that are supplied by in-store bakeries will be transferred to our regional bakery network.
“Wherever possible we would look to offer existing vacancies to the employees who work in our in-store bakeries but anticipate that many will leave the business.”
It also proposes making 110 redundancies in its management and support teams. “In order to compete effectively in the food-on-the-go market we must continue to simplify the business and improve efficiency,” said Greggs.
“By reducing the cost of our support operations we will maximise the scope for investment in front line customer service. As a result we are proposing to restructure our management and support teams across the country and this may result in around 110 roles becoming redundant.
“We will be entering into a consultation exercise shortly to work with trade union and employee representatives of those affected to refine and develop the proposals.”
Greggs expects the proposed changes to result in one-off redundancy costs and asset impairment charges amounting to £9m in 2014, with an on-going benefit of the cost reduction of £6m per year from mid-2015 and that, excluding the one-off costs, there would be a benefit in 2014 of £2m.
During the year Greggs opened 68 new shops (including 15 franchised units) and increased the number of shop closures to 68 leaving total shop numbers unchanged with 1,671 shops trading at 28 December 2013.
It opened 70% of new shops in locations away from high streets. It now have 24 franchised shops in motorway service stations across the UK in partnership with Moto Hospitality Limited, and it opened its first franchised shop with Euro Garages Ltd in September.
“We continue to see the franchise model as offering opportunities for further growth.
“We successfully completed a record number of 216 shop refurbishments in the year, 120 of which were in our new ‘Bakery food-on-the-go’ format, which has now been adopted for all future refurbishments.”
The company said: “We anticipate that we will report full year results in line with our previous expectations when we make our preliminary announcement on 26 February 2014.
“Whilst we have been encouraged by the improvement in like-for-like sales we face a year of significant change as we continue to implement our plan to reshape the business to compete more effectively in the food-on-the-go market. As we have previously indicated the costs of this are likely to constrain profit growth over the next two years; however we are confident that we are building a platform for sustainable long-term profitable growth.”
Chief executive Roger Whiteside said: “I am encouraged by the improvement in trading that we achieved as we progressed through the year, in part reflecting our new ‘Bakery food-on-the-go’ strategy. As a result, full year results should be in line with our previous expectations. Whilst we face a number of challenges in the coming year we remain confident that we can make further progress with our strategic plan in 2014.”
