23rd Mar 2020 16:45
(Alliance News) - Greggs PLC said Monday it is closing all stores from Tuesday onwards and has decided to cancel its final dividend for 2019.
Shares in the bakery chain were down 8.0% in London on Monday afternoon at 1,297.00 pence each.
During the temporary closure, with support from the UK government's Coronavirus Job Retention Scheme, Greggs intends to maintain employment of staff at full contract hours for as long as is practicable.
"We, like other consumer-facing businesses, have seen a sharp reduction in footfall in many of the areas where we trade over the last week. Initially, the impact was seen in transport hubs and in central London, and has since affected other towns and city centres across the UK," the baker said.
Greggs has previously disclosed like-for-like sales in the nine weeks to February 29 were up 7.5%. In the two weeks succeeding this, however, like-for-like sales were 4.1% higher and then fell 9.9% in the most recent week to March 21.
"The rate of decline has been increasing each day as more and more customers heed the government advice on social distancing, and we would expect this to increase further if we were to continue to trade," Greggs said.
Turing to its balance sheet, Greggs expects to end the week with GBP60 million in cash.
In order to improve and maintain this, the baker said it will only complete existing shop projects, whilst deferring new shop openings and planned refurbishments. It also intends to delay building work, except for its major automated cold store project which is strategically important and will continue.
These cutbacks are expected to save GBP45 million.
Also, Greggs has decided to cancel its 2019 final dividend, expected to save a further GBP40 million.
"There are many forward scenarios but we are planning our finances around the most severe, being that our shop operations remain closed for a prolonged period," Greggs said.
As such, the company will have GBP5 million in outgoings but expects to qualify for the Covid Corporate Financing Facility scheme, and has already been in touch with the Bank of England for support.
Providing forward guidance is "impossible", Greggs said, but, in the current environment, no longer expects to make year-on-year profit growth.
In the financial year ended December 28, sales rose 14% to GBP1.17 billion from GBP1.03 billion. Pretax profit was 31% higher at GBP108.3 million from GBP82.6 million in 2018.
"Whilst the outlook during this crisis remains uncertain Greggs is a resilient business with strong growth credentials and we should be confident of its ability to navigate this event and return to growth when the economy recovers," the baker added.
By Paul McGowan; [email protected]
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