Greggs must grow premium offer says analyst as sales plunge
The plant baker and high street retail chain recorded total sales of £811m for the 53 weeks ended 2 January 2021 (down from £1.1bn in the previous year). Fourth quarter (Q4) like-for-like sales averaged 81.1% of the equivalent 2019 level.
Analyst Ross Hindle at Third Bridge acknowledged the battering Greggs – along with the rest of the food-to-go sector – had taken over the past year. However, despite this he said the business’s fourth quarter results were relatively strong.
Highlights of the results
He highlighted the progress made by the baker in online sales since March 2020 and it expected to achieve double digit growth via that channel over the next two years. He also praised its investment into its supply chain, boosting its flexibility for future growth.
“Greggs’ value-targeted product offerings and local town store locations put it in a good position for continued growth and success in 2021,” Hindle added. “Who doesn't fancy a veggie sausage whilst they work from home?
“The big question for Greggs remains around the group's ability to shift its consumer perception away from a purely value proposition and into one where they can charge a price reflective of its improved quality and product offering.”
In November 2020, Greggs reported 820 redundancies as a result of below-normal activity levels across the business, following and employee consultation programme in the fourth quarter. It is unclear how many of those who lost their jobs were working in its bakery plants.
Coronavirus impact
In September, Greggs temporarily halted production and sent 300 staff home from its factory near Newcastle after a “small number” of coronavirus cases were confirmed among staff working at the site.
In its Q4 trading update, Greggs said the uncertainties surrounding the pandemic – including the duration of social restrictions and the impact of higher unemployment level – meant it was difficult to predict future performance. However, it expected profits would not return to pre-COVID-19 levels until 2022 at the earliest.
Chief executive Roger Whiteside said: “Whilst the impact of COVID-19 has been enormous, we have established working practices that allow us to provide takeaway food services under the different levels of restrictions we have experienced.
“The breadth of Greggs' customer base provides ongoing demand for our services which, combined with our diverse geographical spread, has demonstrated the resilience of our business.”
