Yet shares in the vegan sausage rolls, pasties and coffees seller rallied 4.7% to a fresh one-year high of £23.14 as the retailer highlighted a better-than-expected start to 2021. The company said it was seeing ‘an improving trend each week’ despite the persistence of lockdown conditions across the UK.
LURCHING INTO LOSS
Greggs lurched from 2019’s pre-tax profit of £108.3 million to a pre-tax loss of £13.7 million in 2020 as the pandemic sent sales down from almost £1.17 billion to £811.3 million, with like-for-like sales in company-managed shops slumping 36.2% as consumers worked from home and stayed away from the high street.
‘The pandemic has brought to an end a proud record of profitability at food-on-the-go firm Greggs,’ commented AJ Bell investment director Russ Mould.
‘The company has slumped to its first loss since it joined the stock market to the strains of Duran Duran’s The Reflex at number one in the UK music charts.’
Nevertheless, Greggs has demonstrated ‘an ability to take a longer-term view’ according to Mould, by opening 84 stores in 2020 and committing to the opening of 100 new outlets in 2021 – with a target to increase the size of the current estate to 3,000 from the current 2,000 over the medium term.
Though the breadth and diversity of the company’s estate and a strong balance sheet have shielded Greggs from the worst of the pandemic, it has decided keep the dividend suspended until profitability and cash generation return to sufficient levels to resume payouts.
IMPROVING SALES TREND
In the 10 weeks to 13 March 2021, company-managed shop like-for-like sales were down 28.8% year-on-year and delivery sales were 9.6% of total company-managed shop sales.
‘Greggs has made a better-than-expected start to 2021 given the extent of lockdown conditions and is well placed to participate in the recovery from the pandemic,’ insisted well-regarded chief executive Roger Whiteside.
‘It has a clear strategy to extend its digital capabilities and to grow further in new locations, channels and dayparts,’ said Whiteside.
He believes the Covid crisis ‘has shown the resilience of our business model, but most of all the strength of our people who have worked hard throughout to maintain an essential service providing takeaway food to customers unable to work from home, many of whom were themselves key workers.’