Food-to-go retailer Greggs saw its operating profit decline to £25.7 million in the first half of 2018, down from £27.6 million last year, with the retailer citing the impact of extreme weather conditions at this start of the year as the most significant factor affecting its performance.
In addition, the group said that while food input cost inflation 'continues to moderate as expected', the current spell of hot weather is affecting agricultural yields and could result in an additional cost headwind.
Notwithstanding, the group is confident that cost pressures 'remain in line with expectations', and the business is on track to make good progress in the full year, due to a number of strategic investments the firm is undertaking.
In May, the group said that full-year profit was likely to be lower than expectations, due to the poor Spring weather and a drop off in consumer demand.
Sales Performance
Greggs posted total sales of £476 million in the first half, which was up 5.2% on the previous year. Like-for-like sales at company managed stores were up 1.5%.
In the period, it opened 59 new stores and closed 25, with expectations for around 100 net new stores for the year as a whole. It is also increasing its presence at transport locations, opening its first tube station store at Westminster as well as stores at Birmingham New Street, Glasgow Buchanan bus station and East Midlands Airport.
As of 30 June, the company boasted a total of 1,888 stores.
"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 Roger Whiteside, the company's chief executive.
Strategic Investment
The group said that it has invested in expanding its internal supply chain, in a drive to make the business more efficient, with the installation of a new manufacturing facility for doughnuts, the relocation of its pizza production, and changes to its distribution capacity.
It also said that it is 'advancing plans' for a new distribution centre, which it is set to open in Wiltshire next year.
Looking ahead, the group said that it 'remains cautious' in terms of sales outlook given the consumer backdrop in the UK at present, but is 'confident' in the medium- to long-term potential for the business.
"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," Whiteside said.
"Over the year as a whole we continue to believe that underlying profits (before exceptional costs) are likely to be at a similar level to 2017."
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.
