Greggs to reshape its business after fall in sales and profits
While like-for-like sales fell 2.9% in the six months to 29 June 2013, pre-tax profit dropped to £11.4 million from £16 million in the same period last year. Total group sales rose 3.4% to reach £362 million.
In a statement, Greggs said like-for-like sales in the first five weeks of the second half had fallen by 3.2% as the heat wave took hold. This, along with the change in the mix of sales from food items to lower margin cold drinks, impacted profits by a further £2 million. Greggs now expects its profits for the year to be around £3 million lower than previously expected.
During the six month period, Greggs opened a net 19 new shops and refitted 90 existing stores. The company will now slow the rate of new store openings while it improves its existing store estate, and will also focus the growing 'food on the go' market as a means of returning to like-for-like growth.
Greggs said it had simplified its approach by combining elements from its 'Food on the go’ and the 'Local bakery' formats to create a new ‘Bakery food on the go' format where early results from the first nine stores have shown double-digit sales increases. From now on, all shop refits will be in this new format with a further 130-150 refits planned for this year.
Chief executive Roger Whiteside said: “The advantage of a single brand format is that it can be flexed for size and range to target different demographics whilst keeping a simple operational base. Important new features in these shops include the provision of seating for customers where appropriate, improved customer flow and more efficient queue management. The look and feel of this new format draws on our heritage in fresh bakery for the food on the go market.”
The company will also be launching its first digital customer loyalty scheme, "Greggs Rewards", in the coming weeks to enable it to carry out more targeted customer engagement activity for its ‘food-to- go’ offering.
Whiteside added: “We are continuing to make improvements to the products and service in our shops and expect to return to a better trend in sales in the coming weeks.
“Greggs is a strong brand that has the ability to grow shareholder value over the long term. Our focus for the future will be on winning in the growing food on the go market. As a consequence we will spend the next two to three years reshaping the business as we build the platform for long term sustainable profit growth for the benefit of shareholders, employees and the wider community.”
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