The outgoing CEO of food-on-the go firm Greggs has hailed strong trading at the start of the year – but warned that price increases are ‘inescapable’.
The Newcastle headquartered business, which now has 2,224 shops across the UK, reported a 27.4% rise in like-for-like sales growth for the first 19 weeks of the year, a strong figure which compares against the same period in 2021 during restricted trading conditions.
The company said that like-for-like sales growth in the most recent ten weeks to May 14 – when lockdowns in 2021 were easing – has averaged 15.8% and it expects this figure to continue to normalise as it starts to compare with more robust trading periods last years. Total sales in the 19 weeks to May 14 were £495m, up from £378m.
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As expected, Greggs said sales levels in larger cities and in office locations lagged behind the rest of the estate but that transport locations showed a marked increase in activity in recent weeks.
Sales of hot food and snacks are showing particularly strong growth, which bodes well for its plans to roll out more hot food to more locations, with 500 shops targeted for evening openings this year.
Roger Whiteside, who steps down from the board at Tuesday’s AGM, said: “As far as the city and office locations, they’re still not back to normal numbers and we don’t know if they’ll ever get back to normal - they’re about 10% down – because we think there’s going to be more home working compared to pre-pandemic and there’s going to be more online shopping than pre-pandemic.
“On a strategic level we’re not concerned about that - they are not a particularly high percentage of our estate and what we’ve shown during the pandemic is we’ve got shops in all locations and those other locations tend to benefit locally if people aren’t travelling to cities or offices.”
That won’t change Greggs’ plans to open more shops in London, with latest opening coming this week in The Strand and a forthcoming opening in Leicester Square, and travel hubs are also being targeted.
He said: “London 90% full is still fuller than anything else I know, so we’re busy opening shops in London because we’ve got lower rents now.And all major travel hubs that suffered in Covid, we’re desperate to get into those. “We’ve opened in Liverpool and Birmingham airports and opened in Kings Cross and St Pancras during Covid, and have plans to open in as many stations that we can get to. They are still very busy places.”
Mr Whiteside said Greggs has a strong pipeline of openings, having opened 49 new shops since the start of the year, resulting in a portfolio of 2,224 shops in all.
Looking ahead, however, he warned of rising cost pressures, but said Greggs is working hard not to pass on all cost increases to customers.
He said “We moved prices at the beginning of the year and then, when the VAT relief was removed we had to charge VAT again, so that was price movement at that time, and we’re going to have to move prices again very soon. We’re just looking at, selectively, where those prices would move and can safely move them because they are still competitive relative to prices in the market.
“We won’t pass all the inflation on, but when we are forced to put prices up there’s always 5p or 10p typically, and we’ll only do it when the gap between us and our competitors isn’t going to be narrowed by that.
“It has to be carefully managed. But, it’s inescapable in the current climate. Prices need to move.”
He said the company was monitoring the market very closely, adding: “We monitor the market to see how our competitors are moving in price, and we have views from previous experience in terms of what happens as to demand within Greggs if we move prices on certain products, and we put that all together to make sure if we are moving prices, we do it in a way that has the least possible suppression of demand effect. So when prices go up, we don’t unilaterally move everything. Different things have different levels of competition and sensitivity in demand terms.
“It all depends on how much we think the market will bear. That’s what we’ve always done, and right now it’s a time when the whole market is under pressure for costs which we’re all trying our best to work with.
“Our starting point is we won’t pass it all on to consumers, because we want to protect consumers as much as we can from the impact of inflation. So we look to absorb what we can, which comes at the expense of the shareholder, and we look where we can do things where we reduce cost without impacting the size or the quality of the product. Some of those steps are being forced upon us by the extraordinary conditions.”
Meanwhile, he said the firm’s mission to increase its vegan offering was continuing.
He said: “We are on a mission strategically to encourage more people to eat more vegetable content, or plant content in their diet rather than meat, so have vegan options now for most of our catalogue and our bestselling lines and are busy rolling things out like the vegan breakfast. We are still committed to offering choice to vegans and to people wanting to eat meat less, which we think is something we all have to do if we are going to make our contribution to making this planet a safer place.”
The trading update press call was the last Mr Whiteside led as the outgoing CEO, having delivered trading updates and results to analysts and journalists for the last nine years.
He added: “You’ll get more opportunities to ask questions at the half year, but it won’t be with me because this is my final press call and I will stepping down from the board tomorrow and Roisin Currie will be taking over. Thank you all everybody. It’s been fun.”
