Full-year sales at Greggs have broken the £1bn barrier for the first time in 2018, with the business seeing a 7.2% hike in turnover.
The growth follows the business increasing its estate by 99 stores – opening 149 (including 62 franchises) and closing 50 – giving it 1,953 shops at the end of 2018.
Announcing its results for the year ending 29 December, the company reported an increase in pre-tax profits from £71.9m in 2017 to £82.6m, with operating profits excluding property profits and exceptional items up 9.1% to £89.1m.
The business said the first half of 2018 had been significantly impacted by the weather, with severe wintry conditions in early March hitting sales badly, and the June and July heatwave reducing demand for bakery items. It added that, once the weather returned to normal, sales picked up quickly.
“In contrast to the general retail environment, the food-on-the-go sector overall continues to grow, though it remains highly competitive,” said CEO Roger Whiteside.
“We have worked hard over the last five years to redevelop our shop estate in order to be less dependent on shopping locations, and to refocus our product range on growth categories and extended day-parts, which have been key to our success.”
Greggs now has 262 franchised shops, mainly in travel locations, and the business extended its company-managed estate into major transport hubs including Birmingham New Street station, Glasgow Buchanan bus terminal and East Midlands airport. In London, it opened in Westminster underground, Cannon Street and London Bridge stations, which it said had quickly become one of its busiest shops.
The company plans to add at least 100 new shops in 2019, including around 50 franchises.
Greggs also continued a major shake-up of its manufacturing and distribution operations in 2018 that included consolidation of its doughnut manufacturing at Newcastle upon Tyne, transfer of its pizza production to Manchester, closure of the bakery and distribution operations in Norwich, and setting up a national facility for the production of fresh cream products in Leeds.
“The board recognises that 2018 was a year of significant change for many of Greggs’ employees,” said Greggs chairman Ian Durant. “We oversaw and engaged regularly with the exhaustive planning that went into the reorganisation of our manufacturing operations, designed to improve competitiveness and support further growth in the number of shops.
“We were pleased that the changes are being made without a need for compulsory redundancies.”
The company has now started work on a new southern distribution centre at Amesbury in Wiltshire, which is due to be completed by the end of 2019.
From 2020, work will start on converting its Birmingham site to a dedicated distribution centre, and the company plans to build an automated frozen distribution facility at its Balliol distribution centre to reduce reliance on third-party providers.
Looking to the future, Whiteside highlighted “significant uncertainties” in the months ahead, including the potential impact that a disorderly exit from the EU might have on supply chains, tariffs, exchange rates and consumer demand.
“However, Greggs has started 2019 in great form, with company-managed shop like-for-like sales in the seven weeks to 16 February 2019 up 9.6%, and total sales up 14.1%.
“We have enjoyed strong sales growth, particularly in January, helped in part by the publicity surrounding the launch of our vegan-friendly sausage roll,” he added. “We hope to continue benefiting from this strong momentum during the first half of 2019 before facing stronger comparatives later in the year.”