City Column - Fill up on tasty Greggs

The same description could probably be applied to the full-year results that the company dished up this week to a City hungry to find out whether the baker had delivered on the strategic review outlined 12 months ago.

For the 52 weeks to December 29 the company dished up a 13 per cent increase in operating profit to £47.7 million on sales that grew by 6.4 per cent to £586 million. Judging by the two per cent share price increase over the two days following the results the numbers went down pretty well and sated the appetite of analysts and investors.

Although they have since fallen back they still stand at around £43, which when compared with the £45.80 that they stood at exactly one year ago, suggests a relatively decent performance when set alongside the rest of the sector that has been largely blitzed.

And when you throw in the increased price of raw materials that has affected all food companies then this share price performance is not bad at all. It reflects the hard work that Greggs' management has undertaken to develop the business into a “customer-focused operation with a unified national brand” - the company's words not mine.

It has also stated that it is committed to better understanding the million customers who visit its stores each day but it does not elaborate on how it is actually doing this. Every company in the retail sector has the goal of knowing its customers better but how many actually do it? The answer is, not that many, because it is tough task to do properly - Tesco being an exception.

However, there are bits of evidence of it happening at Greggs with the company opening increased numbers of its store on Sundays and extending weekday opening hours in specific locations. It has also been tapping into the trend for softer interiors with a shift away from the overly-bold colours currently employed in the bulk of its stores.

However, proof of it delivering on its promise of more innovative and aspirational products (including healthier lines) seems thin on the ground with it still relying largely on its iconic sausage rolls and the aforementioned doughnuts judging by my (admittedly limited) experience of visiting Greggs stores.

In contrast, it appears to be enjoying some success from its adoption of best practice across all its divisions in terms of working methods, recipes, and production of sandwiches in its shops. This has had a positive effect and gone some way to helping the company offset the increases in raw material costs, although Greggs' management has highlighted that this will continue to represent a serious pressure on its business in the future.

There are questions over how much it would be able to further increase its prices without affecting sales, but for now Greggs is doing a good job managing through this tough environment judging by its like-for-like numbers. During the first half of the year it recorded a 4.6 per cent increase and in the second half they rose 5.8 per cent. And most encouraging is that this trend seems to be accelerating with the 10 weeks to March 8 showing like-for-like sales up an impressive 6.2 per cent.

These numbers would not be too surprising to anybody who has seen the queues at the typical Greggs on a week day lunchtime snaking out the door. The appetite for sausage rolls and doughnuts therefore appears to remain intact, despite the tightening of purse strings by consumers, which probably makes Greggs one of the few tasty morsels in the retail sector.