Greggs has reported continued strategic and operational progress for the first quarter of this year, driven by an ever-expanding estate and strong performances across all channels.
In its trading update for the 19 weeks to 11 May 2024, the bakery chain revealed a 7.4% increase in like-for-like sales at company-managed shops compared to the same period last year. It had previosuly posted a full-year growth figure of 13.7% for its revenue in 2023.
Transaction volume growth so far in 2024 was said to have been supported by improvements in delivery sales, evening trade, and participation in the Greggs App – more than 50% of transactions were being scanned by the end of last year, with the rate continuing to rise in recent months. Total sales for the quarter hit £693m, up from £609m taken in Q1 2023.
“We have a very compelling offer in terms of breakfast, lunch, and into the evening”
Pizza boxes was the star performer among Greggs’ bakery items, with strong growth following a dedicated campaign. The company has also kept on expanding its vegan offerings, introducing a Spicy Mexican Bean Flatbread and bringing back the Vegan Mexican Chicken-Free Bake for its 2024 summer menu launched last week.
With the likes of sausage rolls, bakes, and doughnuts already adapted for vegans, Greggs expects to develop more of its bakery formats with plant-based recipes in due course. “Our commitment is to make sure that for every part of the range we would have a vegan alternative,” commented Greggs CEO Roisin Currie.
Despite the “particularly horrible months” of weather in March and April seeing some customers choosing not to go out to eat, trading at Greggs remained healthy. “Our food-to-go offer is almost not a discretionary spend, so if you are out and about, you need to eat,” noted Currie. “Therefore, we have a very compelling offer in terms of breakfast, lunch, and into the evening, and that’s probably why we win.”
Topping up shops
During the Q1 period, Greggs opened 64 new shops (15 with franchise partners) and closed 37 (including 23 relocations) for a net gain of 27. Recent openings featured sites at Embankment underground station, four sites with Tesco, and three with Sainsbury’s, of which two were at petrol stations.
These helped the Greggs estate hit its 2,500th shop milestone, with a strong pipeline for the rest of the year maintaining its target of adding up to 160 more locations nationwide.
While expanding its presence in travel hubs and roadside locations was still a major part of Greggs’ current expansion strategy, Currie highlighted other areas where she said the chain was underrepresented as well. “That will be your high streets, your suburban parades – we continue to find very compelling opportunities on those as well,” she said.
The CEO confirmed that domestic growth remained the number one focus for Greggs. “There is so much for us to get after in the UK, hence the confidence that we’ve got around all the different growth levers that we’re currently working on,” she asserted.
“I think we’re quite a humble brand, so we’re not at all arrogant enough to believe it’s simply because we love the product range in the UK that we should expect other countries across the world to love that product range. Hence the need to do really good quality research and understand what products that customers would like, and then hopefully that would help us identify markets.”
Investing in the future
Greggs’ new distribution centres in Birmingham and Amesbury are on track to deliver additional logistics capacity by the end of 2024, while its fourth production line for savoury rolls and bakes at its Balliol Park site in Newcastle is set to boost production by 35%.
Supporting its longer-term growth potential are two new sites in the Midlands, which are expected to be operational in late 2026 or early 2027. Greggs revealed it has entered into an agreement to lease a site at the SmartParc Segro Derby campus, with the landlord currently constructing a manufacturing facility for frozen products that will also enable frozen storage, picking, and distribution.
Greggs said that, in addition to self-funded capital expenditure to install the equipment, a leased right-of-use asset of around £65m will also be recognised on the commencement of the lease.
Meanwhile, negotiations are progressing on the purchase of land in the Corby/Kettering area where Greggs intends to develop a national distribution centre for chilled and ambient goods.
Prices on hold
Greggs noted there had been no change to the outlook for cost inflation, which it expected to be ‘in the range of 4-5% on a LFL basis’. This meant it was still not planning to hike prices over the year ahead.
“The majority of cost inflation pressures that we face this year is wages,” confirmed Currie, adding that these had already been put through at the start of 2024. “We continue to keep that under review, making sure that we offer great value to customers.”
Whilst early in the financial year, Greggs stated that the Board’s expectations for the full year outcome remained unchanged.
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