High street bakery chain Greggs, thought by many to be a likely winner in the downturn, said its sales inched up just 1% in the 10 weeks to March 7. It blamed the smaller-than-expected jump on the dismal weather in the first two weeks of February – with the high street covered in snow, people clearly didn’t bother popping out for a cheese-and-onion pasty. And Greggs wasn’t the only one to suffer: according to the British Retail Consortium, like-for-like high street sales fell by 1.8% last month.
Greggs reported its full-year results this morning, and they were a bit of a mixed bag. Chairman Derek Netherton described 2008 as a ‘a challenging year for Greggs’: the bakery chain had to put up with rising ingredient and energy costs, just as consumer confidence was going through the floor. Flour, meats, dairy and labour all got more expensive, and Greggs said it had deliberately chosen not to pass this on to customers (who might get miffed if they have to pay more than 65p for their lunch). So despite sales rising to £628m, up 7.1% (or 4.4% on a like-for-like basis), its underlying pre-tax profit was down nearly 8% to £45.2m.
On the other hand, the fact remains that Greggs is still growing sales. Pret aficionados might sneer at its cheap-and-cheerful charms, but its price point (the average customer spends about £2 per visit) should make it more immune than most to the slowdown. What’s more, it thinks commodity prices will ease this year – so even though it’s not expecting sales to pick up substantially, there should be some improvement in margins. It also said today that it’s disposed of its loss-making Belgian stores, brought its remaining Bakers’ Oven stores under the Greggs umbrella, is planning a share split to make its stock more accessible to smaller investors, and has hiked its dividend by 6% to 149p. So it’s not hard to see why its shares have ticked up slightly this morning.
However, the rest of the high street might not be so lucky, according to the BRC’s February figures: the trade body said that the ‘short burst of spending unleashed by January clearances has largely vanished, replaced by sales as weak as most of last year’. The good news, at least as far as the economy is concerned, is that total sales (to include new retail space) were actually up by 0.1% - so shoppers are still spending money in about the same quantities as last year. Unfortunately, this won’t be enough to save some of the weaker retailers. But Greggs is likely to be one of the survivors...
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