BAKERY giant Greggs is to open an average of two shops a week for the rest of the year and is planning to build a second savouries bakery to keep pace with demand.
The Newcastle-based company, which has opened a net 70 shops this year and is on course to open 100 during 2012, is to invest £30m-£35m over two years to build its new facility.
The company, which opened a £16.5m bakery in Longbenton, Newcastle, last year, is looking for a site in the South and hopes to start building it next year.
Greggs chief executive Ken McMeikan said the bakery was need to “fulfil our significant growth potential which is so great that it outstrips our capacity in Newcastle. “We have shops, wholesaling and franchises across the whole of the UK and we need to double the capacity we have now.
“We remain committed to the North East. Greggs is an iconic North East business, we are very proud of our roots and the supply chain is managed from the North East.
“But we’ve got to have the right capacity and logistically [having a bakery in the South will help].”
McMeikan spoke about Greggs’ expansion plans, which also include the possible growth of its sales to British Forces servicemen and women overseas through the NAAFI, as he revealed a slump in like-for-like sales for the quarter ending October 6.
They dipped by 2.6% in the 14 weeks to October 6, although overall sales were up by 5.9% in the period, thanks to the new shop openings and its other sales channels.
Its shares sank more than 4% yesterday as the retailer said it no longer expected underlying sales growth in its Christmas quarter. The company is also braced for a rise in the cost of ingredients. The National Farmers Union said wheat yields in England and Wales fell 14.1% this year on a five-year average to levels last seen in the late 1980s.
Greggs said it will mitigate the impact of the weaker sales performance through tight control of costs and its ongoing plans to develop the Greggs brand, such as “bake-at-home” products in more than 750 Iceland stores.
As well as the tough economic conditions, McMeikan said the poor summer weather also helped to push down like-for-like sales as people stayed away from the shops. “We are a weather- sensitive business,” said McMeikan. “Especially snow, ice and exceptional rain, which is what we have been experiencing at the end of September.
“In one week of the floods, particularly in the North and Wales, sales were down by 7%.
“The weather has an impact because it stops people coming to the high street for their breakfast and lunch.
“And consumers are finding life tougher. Our customers are spending as much when they come into our shops but are reducing the frequency they buy food on the go.”
He warned the company expected negative life-for-like growth again the final quarter of the year.
Brokers N+1 Singer Equity Research in Newcastle said: “By all accounts, trading in Q3 has proved more challenging than we or the management were anticipating.
“Whilst this is disappointing, it should not totally detract from the progress being made in driving various new channels to market as well as augmenting the core proposition.”
