Greggs forecasts first annual loss since 1984 after sales slump

Joanna PartridgeProfits not expected to return to pre-Covid levels until 2022 at the earliest

The bakery chain Greggs is forecasting that the coronavirus pandemic will result in the company posting its first annual loss since the mid-1980s, while it does not expect pre-Covid profit levels to return until 2022 at the earliest.

Greggs’ annual sales slumped by more than £300m year on year in 2020, pushing it to forecast a £15m full-year loss, as coronavirus restrictions closed its shops and hit revenues.

This would be the first annual loss for the retailer since it listed on the London Stock Exchange in 1984.

The company, which has more than 2,000 outlets in the UK, reported sales of £811m for the 53 weeks to 2 January, a 30% decline on the £1.16bn figure for 2019.

The firm said in a trading update: “We do not expect that profits will return to pre-Covid levels until 2022 at the earliest.”

Greggs said its fourth-quarter sales averaged 81% of the equivalent 2019 level, an improvement on the 71.2% achieved in the previous quarter, while it had to manage variable trading conditions across the UK.

Its chief executive, Roger Whiteside, said the impact of Covid-19 had been “enormous” but the retailer had changed its working practices to allow it to provide takeaway food under different levels of government coronavirus restrictions.

“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,” Whiteside said.

Despite Greggs’ grim forecast for its full-year results, the firm’s shares jumped almost 9% in early trading on Wednesday, making the retailer the biggest riser on the FTSE 250 index.

Investors were encouraged by the news that Greggs sales recovered faster than expected when its stores were allowed to trade, combined with growing revenues from its home delivery service.

The company’s forecast of a £15m loss for 2020 marks a reversal of fortunes for the bakery chain, with its sales exceeding £1bn in 2018 and 2019.

In recent years, Greggs has been on a roll, thanks to the success of its takeaway food products including the vegan sausage roll.

As coronavirus restrictions have kept consumers at home, Greggs has been working to offer a delivery service through a partnership with the food courier Just Eat. However, delivery sales in the fourth quarter were only equivalent to 5.5% of company-managed shop sales.

Greggs also offers products to bake at home through a partnership with the supermarket chain Iceland.

The company has resumed opening new shops where it sees an opportunity and said stores accessible by car were performing particularly well. During 2020 it opened 84 new shops, including 35 franchised units, and closed 56, bringing the total to 2,078 stores.

The pandemic also resulted in job losses at the bakery chain and Greggs confirmed it had made 820 staff redundant in 2020 as it looked to cut costs.

Greggs warned that continuing Covid restrictions, uncertainty over their duration, as well as the impact of higher unemployment levels made it hard to predict its future performance, although it intends to open 100 new stores during 2021.

Greggs “cooked up a good fourth-quarter trading performance”, said Ross Hindle, an analyst at the research firm Third Bridge, “driven by a local town store footprint, keeping stores open during the second lockdown, drive-through capabilities, plus a big push into delivery and collect”.

source: Joanna Partridge

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