Poor weather brings slower sales for baker

May 14 2008 by Chris Knox, The Journal

BAKER Greggs has reported slower sales growth after being hit by bad weather and the credit crunch. The Newcastle firm, which sees its long-term managing director Sir Michael Darrington step down in July, revealed in an interim management statement that like-for-like sales increased by 4.7% in the 19 weeks to May 10, compared to 6.2% for the first 10 weeks of the year.

The UK’s biggest retail baker, famous for its sausage rolls and pasties, also blamed the earlier timing of this year’s Easter break, but said that it had already seen a pick-up in trade as a result of the brighter weather.

And chairman Derek Netherton said the firm remained on track to open an extra 32 stores this year. However, he added that it was an uncertain time for every business addressing the UK consumer market, but that the board was confident in the business’s prospects.

Sir Michael said the current fall in consumer spending was hitting Greggs. He said: “Although we have a pretty unique offering, you need people out and about spending money if you’re going to maximise your sales and we would have to admit that we have not been completely immune to the current problems. Saying that, we have already seen a dramatic pick-up in trade during the first two weeks of May and expect this to continue as the weather improves.

“Our position is definitely steady as she goes, erring on the side of growth, which I believe is a pretty positive outlook when you look at the downturn in other areas.”

Sir Michael, who will continue as a non-executive director at the firm after he is replaced by Sainsbury’s retail director Ken McMeikan in July, also welcomed a drop in price of some of the baker’s core ingredients, especially dairy products, but said that the high price of beef could see further price rises in its stores.

The company, which recorded a record profit increase last year of 27.1% to £51.1m, is also hoping to deliver further value to shareholders by buying back some shares for cancellation.

Mr Netherton added: “We are continuing to pursue a number of initiatives which aim to enhance our customer focus still further. These ongoing changes will strengthen our position further in an uncertain time for every business addressing the UK consumer market.”