Greggs sales improve, investment to bite into profit - UPDATE

9th Oct 2013 07:09

UK bakery chain Greggs saw the rate of like-for-like (LFL) sales decline ease in the third quarter, while the opening of new shops boosted total sales growth. The company, which has nearly 1,700 retail outlets across the country, said that LFL sales were down 0.5% in the 13 weeks to September 28th, an improvement from the 2.9% fall in the first half. This was in line with its forecasts that an improving sales pattern would return in August and September after the impact of the heatwave in July.It said the introduction of new cake and pizza ranges, opening more shops on Sundays and increasing availability of sandwiches in the morning had all driven the better sales.But the group said the cost of refitting stores and other capital investment, which is expected to total about £50m this year and up to £45m a year going forward, would hit profits by about £2m a year in the next couple of years, resulting in a "flattish" profit performance. Chief Executive Roger Whiteside said the recent sales pick-up was encouraging, but he said shoppers still faced spending pressure."We're still cautious because consumers don't have any more money this year than they did last year and we're having to fight for every penny," he said.He added: "Costs will constrain profit growth in the next two years but beyond that we expect to be able to return to profitable growth."Greggs' total sales were up 3.6%, slightly above the 3.4% growth in the first six months of the year, with the company's estate improvement programme still on track as it added 20 new shops and closed 17 during the period.However, it said it now expects no net increase in shop numbers over the year as the anticipated 70 new openings will be matched by closures. The firm has so far refitted 141 of its retail stores this year and said it is on track to deliver 215 refits this financial year, more than half of which will be in its new 'Bakery food-on-the-go' format.The company plans to focus on improving like-for-like sales in the next two years, but hopes to increase its shop numbers to 2,000 in the longer term. "Cost inflation is in line with our expectations and the group's cash position remains strong. Our overall outlook for the full year is unchanged," Whiteside said."We have made good progress in developing our strategic plan and our focus on the 'Bakery food-on-the-go' format. Customers are enjoying the contemporary new look, easy to navigate range and the provision of seating wherever possible."PW