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Greggs blames 'beast from the east' for weaker profits
Greggs blames 'beast from the east' for weaker profits
(about 1 hour later)
Greggs has warned that profits will be weaker than expected in 2018 after the so-called “beast from the east” kept customers away in March and left the bakery chain unable to open some shops.
Greggs has warned of worse-than-expected profits after the “beast from the east” storm hit sales.
The Newcastle-based firm, best known for its sausage rolls and pasties, said dwindling footfall during the bad weather, as well as a strong comparative performance in the same period of 2017, contributed to a tough trading backdrop throughout March and April.
The Newcastle-based firm, which has about 1,900 shops across the UK, said the bad weather kept shoppers off the streets – and away from its sausage rolls and steak bakes. The chain was also up against strong comparative performance in the same period of 2017.
The bakery chain suffered disruption during the snowstorms in late February and March, with delivery vans struggling to reach their destinations and staff unable to make it into work, particularly in Scotland and parts of Wales, which experienced the worst of the weather.
In an update for the first 18 weeks of 2018, Greggs said it was expecting the full-year profit to be about the same as last year’s £81.8m. City analysts had been forecasting £87m and Greggs’ shares slumped 15% to £10.80.
“For a period of about 10 days we were significantly disrupted, with a double-digit decline in sales in that period,” the chief executive, Roger Whiteside, said and explained that lost sales would not be made up because “people don’t come in and have two lunches the week after”.
The bakery chain suffered disruption during the snowstorms, with delivery vans struggling to reach their destinations and staff unable to make it into work, particularly in Scotland and parts of Wales, which experienced the worst of the weather.
However, he said the poor weather alone could not be blamed for tougher trading.
“For a period of about 10 days we were significantly disrupted, with a double-digit decline in sales in that period,” said the chief executive, Roger Whiteside. Lost sales would not be made up, he said, because “people don’t come in and have two lunches the week after”.
“Sales in May have started more strongly than we experienced throughout March and April but are not as good as January and February, so there is an underlying trend there.”
However, he admitted the poor weather was not solely to blame for the downturn. More recent sales had been better than March and April but were still behind January and February “so there is an underlying trend there”.
He said that while average customer spend had increased to about £3 because of the Greggs meal deal offers, fewer customers were coming through the door, reflecting the general weakness on the high street.
He said that while average customer spend had increased to about £3 because of the Greggs meal deal offers, fewer customers were coming through the door, reflecting the general weakness on the high street.
“Given the uncertainties over market footfall we are cautious in respect of the outlook for sales in the balance of the year,” he said.
Sales growth at shops open for more than 12 months slowed to 1.3% in the first 18 weeks of the year, from 3.5% over the same period in 2017.
In an update for the first 18 weeks of 2018, Greggs said it was expecting full-year profit to be roughly unchanged from the £81.8m achieved in 2017. City analysts were forecasting profits of about £87m for 2018 and shares in the group tumbled 15% to £10.80.
Greggs said its breakfast and hot food menus were proving popular among customers. The chain said sales of healthier options have also continued to grow as it has extended the range on offer for the summer.
“Taking into account trading conditions in the year to date, and our more cautious outlook, we currently believe that underlying profits for the year are likely to be at a similar level to last year,” Whiteside said.
Whitehead said the bakery chain benefited from the warmer weather at the beginning of last week as it coincided with the launch of its summer menu – but then the temperatures rose too high. “When it gets to about 25 degrees-plus, people don’t go out, they tend to stay in their gardens and entertain in a different way. So it was a mixed week.”
Sales growth at shops open for more than a year slowed to 1.3% in the first 18 weeks of the year, from 3.5% over the same period in 2017.
“In the period … market data confirms weak customer footfall in retail locations, which has impacted demand for food on the go. The impact was especially significant in the weeks of severe weather when many shops, including our own, could not be opened,” the company said.
Greggs, which has about 1,900 shops across the UK, said its breakfast and hot food menus were proving popular among customers. The chain said sales of healthier options also continued to grow as it extended the range on offer for the summer.
Whitehead said the bakery chain benefited from the warmer weather at the beginning of last week as it coincided with the launch of its summer menu, and sandwiches and cold drinks sold well.
“The week started well but started to tail off when it got superhot. When it gets to about 25 degrees plus, people don’t go out, they tend to stay in their gardens and entertain in a different way. So it was a mixed week.”
Despite the cautious tone, Whitehead said Greggs was well placed to compete for sales in the months ahead, with a bigger range of value meal offers to appeal to customers.
Cost pressures are also easing at the bakery firm as inflation eases. Whitehead said its food ingredients bill rose by about 6-7% last year after the sharp fall in the value of the pound. That has since fallen to 3-4% and is easing further, he said.
