Despite the pasty tax mayhem earlier this year, Gregg’s does not blame the chancellor’s half-baked idea for its latest results: profits fell to £16.5m in the six months to the end of June. That’s down from £17.3m the previous year, even though revenues actually climbed 5% to £350m. Instead the bakery blames the record levels of rain across the UK in June and July for keeping people away from racks of scrumptious treats in its stores.
In a statement, the firm said that footfall in stores was down by more than 7%, which hurt the most profitable element of the business. Revenues were able to climb partly because the chain sells some of its products though Iceland stores, and it said the deal was ‘performing better than expected.’ But really, that’s just the icing on the cake: most of the growth has come from Greggs’ expansion over the half-year. It opened 39 new shops and closed six, giving it a total portfolio of 1,604 nationally at the end of June. That expansion is set to accelerate in the second half, with plans to have opened 90 new premises by the end of the financial year.
The expansion means that like-for-like sales actually fell 2.3%, but the firm is investing in a major refurbishment programme of around 200 existing stores, as well as bringing dozens of Baker’s Oven stores under the Greggs brand umbrella. If and when the high street upturn comes – and people do need to eat tasty treats once in a while – it looks like Greggs will be in a strong position.
Perhaps more attention than ever was given to high street bakeries in the wake of George Osborne’s ‘pasty-tax’ and the subsequent U-turn earlier this year. The tax was designed to squeeze some cash out of hot foods served in the bakeries, but was shelved after confusion about what constitutes ‘hot food’ arose. Is it ‘cooked’ when it’s kept at room temperature or not? Who knows?
Greggs’ statement didn’t mention it, but we reckon the whole affair ended up being a useful but of promotion for the chain. Having their cake and eating it, so to speak.