Footfall and costs at Greggs have been hit by the weather, with the business reporting a drop in profits.
The business’ operating profit in the first half of this year was £25.7m, down from £27.6m in the first half of 2017.
Greggs had earlier stated that poor weather conditions in early spring had caused the temporary closure of some shops and impacted customer footfall that hit food-to-go trade in retail locations.
In its interim results for the 26 weeks to 30 June, published today (31 July), the company said hot weather was now affecting agricultural yields. As reported by British Baker, the heatwave has pushed the cost of feed wheat to a five-year high, with bread prices also rising.
Greggs’ total sales rose 5.2% to £476m, with like-for-like sales through company-managed shops up 1.5%. In contrast, sales rose 7.3% and 3.4% respectively a year ago.
The company reported it had opened 59 new shops, including 19 franchised units, and closed 25 shops, giving it a total of 1,888 trading at 30 June 2018. Openings in the last six months have included its second drive through, at Ashby-de-la-Zouch, and its first London Underground shop in Westminster Tube station.
The openings reflect the shift in the brand’s location strategy: in 2013, 20% of its sites were serving catchments outside of traditional shopping locations – that figure is now 35% and the company plans to grow it to 50% in the longer term. Greggs expects to have made around 100 net openings in the year as a whole.
Strong growth continued to be seen in sales of hot drinks, breakfast, healthier choices and hot food, reported Greggs, with these ‘growth categories’ accounting for 30% of sales, up from 15% five years ago. The company recently expanded its £2 breakfast deal to include yoghurts and fruit pots, and has introduced a £2 ‘pizza slice + drink’ offer after 4pm.
“Greggs has delivered a resilient performance despite challenging market conditions and we have continued to make good progress with our strategic investment programme to transform the business into the customers’ favourite for food-on-the-go,” said Greggs CEO Roger Whiteside.
“While we remain cautious in respect of the outlook for sales in the balance of the year, given the consumer backdrop, we are confident in the medium and long-term growth potential for the business, supported by customers’ response to our initiatives, our strong cash generation and the ongoing strategic investments that we are making.”
He added that the company expected underlying profits before exceptional costs were likely to be a similar to 2017.