Greggs has become the latest café and bakery chain to close its doors in wake of the coronavirus pandemic.
More than 2,050 shops in the UK will temporarily close at the end of business today (24 March) in order to “protect our people and customers”, CEO Roger Whiteside announced.
It follows temporary store closures from Costa, Subway, Pret and Patisserie Valerie.
The business had taken measures to help prevent the spread of Covid-19 including increased hygiene and separation methods, providing a solely takeaway service, only accepting card payments and advising customers to follow social distancing guidelines while waiting to be served.
“It is now clear that to protect our people and customers we need to go further and temporarily close our shops completely,” Whiteside said.
“During this period, with support from the Government’s Coronavirus Job Retention Scheme, we intend to maintain employment of colleagues at full contract hours for as long as is practicable.”
Any unsold food will be distributed to local communities and support will be added to those in hardship through the Greggs Foundation.
Whiteside reported a “sharp reduction” in footfall in many areas over the past week, initially in transport hubs and central London but this has since spread to other towns and city centres across the UK. Sales have also fallen – company-managed shops suffered a 9.9% decline in the week to 21 March 2020.
“The rate of decline has been increasing each day as more and more customers heed the government advice on social distancing, and we would expect this to increase further if we were to continue to trade,” he added.
Discussing the company’s financial position, Whiteside said Greggs had always maintained a strong balance sheet and expects to have £60m in the bank at the end of the week, having made normal payments to staff, suppliers and landlords.
“In order to protect our financial position, we are reducing cash expenditure to protect our liquidity in the short term while continuing with key long-term strategic programmes.”
As a result it intends to only complete existing shop projects whilst deferring new openings and planned refurbishments. In the supply chain, it will spend where necessary to maintain continuing operations and will delay building work, with the exception of a major automated cold store project. Overall, it expects to remove £45m from this year’s planned capital expenditure programme.
It will now not pay the previously-announced final dividend for 2019, which was due to be paid on 21 May 2020, and has stopped the programme of share purchases by its Employee Benefit Trust. These two actions will avoid around £40m of outgoings this year.
Looking forward, Whiteside said Greggs was planning its finances around the most severe scenario – being that shop operations remain closed for a prolonged period.
“Our weekly cash outgoings in such a situation are estimated to be £5m, assuming Government relief for business rates and that employment support is available to maintain all of Greggs jobs. This includes rents paid monthly in advance but not those paid quarterly in advance, which total £11m per quarter and next fall due at the end of June.”
The news comes after a strong performance for Greggs in 2019 and a “very strong start” to 2020. As a result of the current situation, it said it “no longer expects to make year-on-year profit progress” but expects to return to growth when the economy recovers.