Greggs has said that profits will be “materially higher” than expected and could return to pre-pandemic levels this year thanks to robust sales since shops reopened.
In the latest indication that the UK economy is recovering strongly, the bakery and café chain noted that pent-up demand had boosted high street footfall since lockdown was eased.
Greggs said in a trading update yesterday that like-for-like sales were down 3.9 per cent in the last eight weeks compared with the same period two years ago but since non-essential retail reopened on April 12 sales were positive compared to two years ago. Shares in Greggs rose 246p, or 10.5 per cent, to £25.91 following the statement.
The Newcastle-based company, popular for its sausage rolls, pasties and steak bakes, has more than 2,000 shops across the country. Its performance has traditionally been a useful barometer of the health of the economy and the high street. The company said that if the performance of recent weeks was maintained, profits could return to close to 2019 levels, when pre-tax profits were £114.2 million on sales of £1.17 billion. This would be “materially higher” than the board’s previous expectations, Greggs said.
Sales in the eight weeks to May 8 were £324 million, a £72 million increase on the same period a year ago but £21 million lower than in 2019.
“In recent weeks, following the easing of restrictions across the UK, we have seen a strong recovery in sales levels,” Greggs said.
The company noted strong progress in both “walk-in” sales and takeaway deliveries, which are available from 800 of its outlets. The proportion of deliveries reduced slightly, despite being made available from another 200 shops. It dropped from 9.6 per cent in the first ten weeks of the year to 8.2 per cent in the most recent eight-week period.
Despite the boost in sales, Greggs acknowledged that its outlook is clouded by uncertainty, with the current trading environment “highly unusual” and sales “difficult to predict”.
The further relaxation of restrictions will create “increased competition as cafés and restaurants are able to compete more effectively with our largely take-out offer”, it said. From next Monday, pubs, restaurants and cafés in England will be allowed to serve customers indoors again.
Greggs reported a £13.7 million loss for 2020 and cut more than 800 jobs because of the impacts of lockdowns. This was its first annual loss since it listed on the stock market in 1984. Greggs took £87 million in government furlough support for workers and business rates relief totalling £18.8 million.
Analysts at Peel Hunt said on the back of the trading update: “We were not convinced that FY19 profit levels would return any time soon and we were wrong.”
Peel Hunt’s forecast for Greggs’ pre-tax profits for the 2021 financial year was updated to £105 million and the prediction for the following year was increased by about a third to £125 million, well above 2019 profit levels.