As Britain’s retailers fight persistent declines in the number of visitors to UK high streets, bakery chain Greggs (GRG) has beaten the odds. The group had already upped its profit guidance twice in the past four months following strong sales growth across its stores, but made a third improvement to annual profit expectations this week. Over the seven weeks ended 16 February 2019, total sales rose by more than 14 per cent, reflecting a 9.6 per cent improvement in company-managed shop like-for-like sales.
The group has its controversial vegan sausage roll to thank. The alternative version of one of the brand’s most popular products was launched in January, prompting intense debate on social media. But bosses said the group’s recent performance had been "supported by extensive publicity", resulting in a higher number of customer transactions.
The rate of growth has tapered slightly in February, but the recent strength of trading is still expected "to have a material impact on the first half result for 2019", particularly as comparative figures from this time last year – which were impacted by the ‘Beast from the East’ snowstorm in March – should be easy to beat. Even better, the board says 2019 full-year underlying profit before tax is likely to be ahead of previous expectations.
Brokerage Shore Capital believes the strong trading has generated "considerable operational gearing benefits across both the store base and manufacturing infrastructure" – enough to prompt analysts there to upgrade a below-consensus FY2019 pre-tax profit forecast by roughly 10 per cent to £102m, leading to earnings per share (EPS) of 79p.
