High street bakery giant Greggs has said it had a “very strong Christmas”, with own shop like-for-like sales (LFLs) up 4.5% for the financial year.
The business again focused on its food-to-go offering, and said that, over the Christmas period, it saw growth in sales of sandwiches, sausage rolls and coffee.
For the five-week trading period ended 3 January 2015 it said LFLs grew by 8.2%.
It also praised the success of its ‘Balanced Choice’ range of products, which are all sold with fewer than 400 calories. It reported growth in sales within the range, and said new products such as its fresh soups and the steak and cheese rolls had been well received.
Roger Whiteside, chief executive, said: “Since our last update on 15 December we have experienced a very strong level of trade through the Christmas and New Year period. Customers have clearly responded to the improvements in our product offer and service, designed to meet the needs of the food-on-the-go consumer, during this busy period.
“This has been a year in which we have made good progress with our strategic plans and have seen a welcome improvement in financial performance. We remain clear on our priorities and are confident that we can make further progress in the year ahead.”
Convenience locations
In the trading update, for the 53 weeks ended 3 January 2015, the bakery retailer said that customers seemed to have responded to improvements to products, services and shops. The company has now completed the refurbishment of 213 shops.
It also said it had opened 50 new sites, including 20 franchised units, and closed 71 shops. This leaves the business with a total of 1,650 shops as of 3 January 2015. It said it would continue to seek growth in travel and convenience locations, and now has 45 shops operating in such sites.
Looking ahead, the company said it anticipated a continuation of the strong results, above previous expectations, when it makes its preliminary announcement on 4 March 2015.
Its focus will be on reshaping effectively in the food-on-the-go market.
Analysis
Fiona Cincotta is a senior market analyst at Finspreads, owned by City Index Ltd, a global provider of retail trading services.
She says, "Greggs reports a stronger Christmas trading season than market expectations and says results for the year will also beat expectations.
"Sales in established branches were 8.2% higher during the five weeks to 3rd January compared to a comparable period a year before.
"Greggs on 15th December upgraded profit forecasts for the second time in four months, saying it was benefiting from a favorable trading environment. It expected profit for the 53-week period to 3rd January to be ahead of analysts’ expectations at the time.
"Market forecasts called for pre-tax profit of £53.6m vs. £41.3m the year before. Since December, market forecasts rose to £58.96m. The fact that Greggs repeated today that it would beat expectations suggests market forecasts are still too low- clearly bullish for the shares.
"On the downside Greggs’ free cash flow reached £20.74m by December 2013, vs. £9.6m in the half year to June 2014.
"This shows Greggs’ business is highly cash-generative, but free cash flow is volatile. Greggs had more than £42m to spare in Jan 2010."
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