Value-for-money pay off for Greggs
Jan 8 2009 by Chris Knox, The Journal
GREGGS has defied gloomy high street conditions after like-for-like sales rose by more than 5% during the Christmas period and it is now looking to continue its growth plans this year.
The Newcastle company said sales had increased by 5.3% in the four weeks to January 3, 2009, helping it to achieve full year sales growth of 7.1% – an increase of 4.4% compared to 2007.
The figures represent a turnaround for the firm, which was forced to put out a profits warning in October and delay its growth plans after suffering from a wet summer and increased ingredients prices.
It believes that its value-for-money products appealed to cash-strapped consumers during the Christmas shopping rush and is currently developing a range of new lines to attract additional customers.
However chief executive Ken McMeikan did warn that some degree of pressure on trading would remain throughout 2009.
He said: “The trading outlook for 2009 is demanding and customers will continue to feel the impact of the economic downturn. Costs will remain high into the first half despite the recent easing of prices for fuel and a number of key commodities.”
However, Mr McMeikan pointed to the firm’s lack of debt and the fact it remains strongly cash-generative – allowing it to gain from potential opportunities for further growth as its rivals falter.
The firm, which employs around 2,500 staff in the North East, also plans to open 60 UK shops this year and is also looking to resuscitate plans to develop a third bakery in Greater London.
It will also complete the rebranding of its remaining 159 Bakers Oven shops, which will take up a significant portion of the £35m capital expenditure planned for this year.
December saw the firm invest £11m in a new 50,000sq ft bakery in Newcastle to sit alongside its existing site at Balliol Business Park, which added 20 jobs to the site’s 236-strong workforce and helped increase production by 50%.
Mr McMeikan said: “There is still plenty of opportunity for growth in the domestic market and although international expansion is always an option for the future, we want to concentrate on opening new stores in areas such as the South West where we are massively under-represented.”
John Dickinson, research analyst at Brewin Dolphin, said: “We expect Greggs to report a profit before exceptional items of around £45m when it reports in March, which will down from around £50m in the previous year. However, this is expected due to the terrible summer last year. Despite this, the company’s value for money products put it in a good position for the continuing recession.”
To read Ken McMeikan’s first in-depth media interview, click here
