Rain brings flood of hungry shoppers

Oct 10 2007 by Chris Knox, The Journal

THE RECOVERY of baking group Greggs continues after the summer wash-out helped the company to increase its sales in the past 16 weeks.

The baker said the cold, wet summer had helped sales increase 5.9% compared with the same time last year, when a warm, wet summer resulted in sales growth of only 0.2%.

The company will create 200 jobs as it adds 13 stores to its 1,353-strong chain by the end of the year. This will bring the total of new sites for 2007 to 30, up from its previous target of 20 to 25. The new branches are unlikely to be in the North-East, where it has a strong presence.

The company managed to boost sales despite price rises of ingredients after flood damage to UK crops. It was able to pass on these costs by increasing the price of products.

Managing director Sir Michael Darrington said: “We are bearing significant increases to the cost of several key ingredients, including flour and dairy products, with protein price rises in the pipeline. These cost pressures have been mitigated to some extent by forward buying.

“With the help of this year’s weather, our robust performance encourages us to believe that current and anticipated cost increases will be recoverable from the market place, with our selling price inflation continuing to run at around the current level of 4.5%.” When the Newcastle company posted first-half results last August it said sales had risen 5.2% to £256m, against £243m at the same time last year.

The firm said yesterday its new television advertising campaign with Paddy McGuinness had improved brand awareness in the South.

However, retail director Raymond Reynolds admitted the business would be proceeding with caution. “We are aware that consumers will be tightening their belts in the run-up to Christmas and that the crisis in the credit markets will have affected their confidence. However, we are well positioned to counteract such issues,” he said.

The City reacted well to the statement, with Greggs’ share price closing 260p higher yesterday to 4,910p.

Vinay Bedi, Newcastle divisional director at fund management company Wise Speke, said: “Whilst many in the North-East continue to focus on the trauma and survival prospects of one of our region’s most prominent companies, Northern Rock, we should not lose sight of the fact that we remain home to a great many more excellent businesses which continue to perform exceptionally well. Greggs is one such fine example.

“There’s no doubt the weather through August and September was ideal for selling Greggs’ products but bearing in mind the increase in prices for raw materials such as flour and dairy products, the operating profit rise was noteworthy.”