9th Oct 2013 09:56
LONDON (Alliance News) - Greggs PLC said that total sales were up 3.6% in the third quarter, as the UK bakery chain also managed to slow its decline in like-for-like sales.
The pasties, baked-goods and sandwiches chain said that total sales growth in the 13 weeks to September 28 was boosted by net new shop openings and continued growth from franchised shops.
Although like-for-like sales were down 0.5% in the quarter, its still a marked improvement from a 2.9% decline in the first half of the year.
Greggs said that in the year to date total sales were up 3.5%, while like-for-like sales were down 2.1%.
Greggs already has issued two profit warning this year, after it reported a big drop in like-for-like sales and profits in the first half of the year, due to the summer heatwave in the UK and fragile consumer confidence. But it said Wednesday that its overall outlook for the year now remains unchanged, encouraged by recent improvements to trading.
Chief Executive Officer Roger Whiteside told journalists in a conference call that the better trading performance so far in the second half of the year was boosted by a roll-out of new cake and pizza product ranges, extended shop working hours, food availability in the mornings for products such as sandwiches, and a good response to its GBP2 breakfast deal.
Whiteside said that it has relaunched its entire sweet range, including its popular rocky-road brownies, and has revamped 25% of its slowest selling lines by putting them into better-lit positions within the store displays.
In an attempt to encourage more sales, Greggs announced in its half-year report in August that it would be launching a customer-loyalty scheme in the following weeks. However, Whiteside told Alliance News in the newswires call Wednesday that the scheme is not yet ready to launch, as it is still in the 'friends and family' stage to iron out any glitches. He didn't confirm when the launch date will be.
Greggs said that it will spend the next two to three years re-shaping the business to address the shifting trend in 'food-on-the go', as it tries to redevelop products better suited to snacking and lunchtime treats.
Whiteside declined to say how much money Greggs is looking to invest in total during that period, but said the company is looking to spend around GBP25 million on processing systems within the next few years. He said the costs of investing in its core business are likely to constrain profit growth over the next two years.
The bakery chain said that is has abandoned plans to increase the number of stores, as the number of openings match closures. But it said that its shop re-shaping plan is ahead of schedule, with a total of 141 completed shop refits so far this year, and a target of 215 by year end - more than half of which it said will be in its new 'bakery food-on-the-go' format'.
Gregg's Finance Director Richard Hutton told journalists that the average spend on the refit of each shop is around GBP75,000 to GBP80,000.
The group said that, as at September 28, it had a total of 1,693 shops operating, including 25 franchised operations, and its first franchise shop with Euro Garages Limited.
In its half-year report back in August, Greggs said that its cost saving targets, new shop openings and growth in wholesale sales were not enough to offset profit erosion.
Hutton told journalists on Wednesday that Greggs will continue with its wholesale partner Iceland, as the supermarket chain has helped grow profits. However he said that it will not be extending the wholesale programme to other retailers.
Greggs shares were amongst the biggest FTSE 250 gainers Wednesday morning, trading 2.3% higher at 437.10 pence per share.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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