26th Feb 2014 13:06
LONDON (Alliance News) - Baker Greggs PLC Wednesday said it will continue to focus on building its food-on-the-go business in 2014, after reporting lower profits and like-for-like sales in its last financial year.
The company did well during the financial crisis and economic downturn as sales of hot, inexpensive items like sausage rolls and pasties did well, but it ran into trouble last year and it issued profit warnings as sales slid in the first half of the year and investments in its shops weighed on results. It has decided to build a bigger food-on-the-go business to try and capitalise on growing consumer demand for that sort of product, rather then its take-home bakery products.
"2013 was a year of transition for Greggs as our new strategic focus centred on the growing food-on-the-go market. Whilst total sales for the year rose 3.8%, like-for-like sales were down 0.8% reflecting the tough and competitive trading conditions. However, I am encouraged by the improvement in performance in recent months as our new strategic focus started to deliver benefits," Chief Executive Roger Whiteside said in a statement.
The company, which was trading from 1,671 shops by the end of the year, reported a pretax profit of GBP33.2 million for the 52 weeks to December 28, 2013, down from GBP52.4 million the year earlier period, even though revenues rose to GBP762.4 million, from GBP734.5 million.
It blamed lower like-for-like sales in the first half of the year and the initial investments into its deeper push into good-on-the-go. It booked exceptional charges of GBP8.1 million as it closed loss-making stores, restructured its coffee shops, and developed its plans to re-shape its estate and improve its supply chain.
Its operating margin before exceptional items fell to 5.4%, from 7.0% as it was unable to offset input cost rises with an additional GBP5.3 million of cost savings in the year, mainly due to the fall in like-for-like sales. It said the rate of food inflation started to ease in the fourth quarter of the year.
Greggs' change of strategy showed early signs of paying off as like-for-like sales improved as the year went on. Like-for-like sales were up 1.2% in the second half of the year and 2.6% in the fourth quarter alone.
It has launched a new ?Greggs Rewards? mobile payment app, a reward loyalty scheme that it hopes will help it win back customers. The app went live this week.
"Customers can quickly pay for their favourite food and drinks via their smartphone, to be rewarded with exclusive, personalised offers and free tasty treats which we will continue to introduce and
develop throughout the forthcoming months," said Whiteside.
However, the company admitted that 2014 will remain challenging as it continues to pursue its turnaround plan.
"Market conditions are expected to remain challenging in 2014. It will be a year of further change for Greggs as we move forward with our plan to focus on the food-on-the-go market and build on positive recent trading momentum," Whiteside said.
Greggs maintained a final dividend of 13.5 pence, meaning the total dividend for the year was also unchanged at 19.5 pence.
Greggs shares were down 5.9% at 498.5 pence early Wednesday
By Steve McGrath; [email protected]; @SteveMcGrath1
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