Greggs offsets costs with sales rise

Related tags Greggs Like-for-like sales Minimum wage

The UK's leading retailer of bakery-related products, Greggs, has
announced better-than-expected sales for the 18 weeks to 16
October, helping the company to hold off rising costs.

Greggs' like-for-like sales increased by 6.2 per cent compared to the same period last year. Most of the success came in the first seven weeks as like-for-like sales rose by 7.4 per cent, predominantly because extremely hot weather in the same weeks of 2003 caused sales figures for that period to fall below average.

For the last 11 weeks, the like-for-like sales increase has levelled at around 5.4 per cent, although total sales have risen by 9.8 per cent for the whole 18-week period - largely as a result of products' higher prices.

The figures should help to cushion the impact of growing costs on the company. "Labour costs are rising as we respond to market pressures on wages in the retail sector and we are also experiencing significant increases in energy and protein prices,"​ said Sir Michael Darrington, Greggs managing director.

According to Darrington, wages have had to rise to ensure that Greggs "continues to attract and retain the high quality people on whom our reputation for good service depends"​. James Hill, of global consultancy group Hudson Sandler, said that in order for Greggs to get its high quality staff the company had to continue to pay wages above the national minimum wage threshold, a figure which increased to £4.85 (€ 7) for adults earlier this month.

Despite the costs, Darrington said he was pleased with the 2004 performance so far and remained bullish about the company's prospects, even though the company predicted like-for-like sales would decrease for the rest of the year, reflecting a similar trend in 2003.

"Profits to date are in line with our expectations. We have added a total of 24 shops, net of closures, in the year to date, and now expect to exceed out stated target of adding a net 30 shops to our estate by the end of the year,"​he said.

Indeed, Greggs has an aggressive expansion policy, aiming for 1,700 shops by 2010, attained either through growth or acquisitions; a 500 increase on the company's current total of 1,200 Greggs and Bakers Oven outlets.

And the company is looking to mainland Europe, in addition to the UK, to help fuel its expansion. Last year marked the start of the campaign as Greggs opened two shops in Belgium, but the target is to become "Europe's finest bakery-related retailer"​.

Greggs has 11 bakeries across the UK to supply its stores in eight regional divisions and is currently thought to be worth about £450 million (€647 million). Best-selling products include sandwiches, pasties, sausage rolls, and doughnuts.

The company added the Bakers Oven brand to its portfolio 10 years ago after acquiring the retail branch of UK bakery giant Allied Bakeries.

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