Greggs steps up activity as costs bite into profits

19 May, 2006
Page 3 
Bakery chain Greggs says it is taking action to drive sales growth, including a TV advertising campaign, new promotional initiatives and the launch of new healthy products, following a drop in year-on-year profits.
At its AGM last week, Greggs announced that profits this year so far are materially below last year’s, due to factors including high energy costs. MD Sir Michael Darrington told British Baker that Greggs has several initiatives in hand to improve sales. It has started a national TV advertising campaign, in all regions apart from the south-east with a major four-week burst. This campaign will remind people about the basics of the Greggs business he said.Greggs is also offering new promotional activities in stores around the country, although details are being kept under wraps, he said. It will also be putting more emphasis on healthy options, Sir Michael revealed. Some new products will launch across the whole of the UK in the next two months.Greggs, which currently has 1,331 stores, is also taking action to reduce its discretionary spend in areas such as research and upgrading infrastructure, Sir Michael said. The Greggs business was driven by expansion and growing sales, he said, rather than reducing costs. There are areas where costs can be reduced, Sir Michael explained.Speaking at the AGM, Greggs chairman Derek Netherton said like-for-like sales in the 18 weeks to 6 May 2006 were flat, continuing a trend already reported. That compares with a period of very strong growth in 2005, when like-for-like sales in the first 19 weeks increased by 5.8%. “Costs have increased as we expected, with the rise in energy costs making a particularly strong impact on the first half. As a result, profits to date remain materially below the level of last year,” added Netherton. But Greggs expects to see benefits from reduced costs and a number of initiatives to drive turnover growth, he said.Greggs’ interim results will be announced on 4 August 2006.



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