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Greggs blames weather for fall in sales Greggs blames 'promiscuous' shoppers for fall
(1 day later)
The high street bakery chain Greggs has issued a surprise profit warning, blaming the cold weather for an unexpected fall in sales which will see profits failing to hit expectations. High street bakery chain Greggs has warned that its profits this year will fall short of expectations, blaming cold weather, tough competition and "promiscuous" shoppers for an unexpected fall in sales of sausage rolls and sandwiches.
The unscheduled announcement sent shares in the sandwich and sausage roll chain tumbling 7.5%, or 34.6p, to 427.9p in early trading. The company did not reveal how far profits would fall, only saying they would be "slightly below the lower end of the range of market expectations" of £47.5m. The announcement, just four months into the chain's financial year, sent Greggs' shares tumbling nearly 9%, or 40p, to 423p - their lowest level for more than three years. The baker did not reveal how far profits would fall, saying only they would be "slightly below the lower end of the range of market expectations" of £47.5m.
It means profits are set to fall for the second year in a row as the company struggles with fewer shoppers and a squeeze from competitors. Chief executive Roger Whiteside said the main cause of Greggs' problems was customers being drawn away by rivals.
Greggs is the latest company to blame the weather for poor sales, following a similar profit warning from the department store Debenhams last month, which blamed heavy snow in January for its own misfortune. Greggs saw like-for-like sales in the 17 weeks to the end of April fall 4.4% because of the snow in January and some of the coldest March weather in 50 years.
The Greggs chief executive, Roger Whiteside, said like-for-like sales in the 17 weeks to end of April had fallen 4.4% because of the snow in January and some of the coldest March weather in 50 years, although sales had improved in the past two weeks, declining 1.5%. However, sales have failed to bounce back in recent weeks, falling 1.5% in the last fortnight compared with a weak April last year. Whiteside said: "We are not putting this all down to the weather. The trend of the last few weeks shows there are fewer customers shopping.
He added: "We are continuing to experience lower footfall across much of the estate, although average transaction values have increased marginally. "This is drawing us to the conclusion that weather can no longer be a factor [in the decline]."
"Our new shop openings remain focused on locations that have been less impacted by lower footfall such as workplaces, travel and leisure destinations. Last year Greggs' profits fell for the first time in five years, with Whiteside blaming the poor weather for a 2.2% fall in pretax profits to £52m, with underlying sales down 2.7%.
"We are not putting this all down to the weather. The trend of the last few weeks shows that there are fewer customers shopping, so we are trying to make stores more attractive and provide more space for customers in our stores so they can stay inside and out of the bad weather." However, he now believes part of the fall could be due to casual customers opting for rivals. "Customers have become more promiscuous, looking for the best deal. The economy has been bumping along the bottom and there has been a compounding effect which means people have to be very careful about the pound in their pocket."
He said the company's stores in traditional high street locations were suffering as the casual sausage roll buyer saved money by eating at home, while new sites in railway stations and commuter hubs – or "non-conventional" locations as the company calls them – were trading well. He said the company's stores in traditional high street locations were suffering as customers saved money by eating at home. At the same time sites in railway stations and commuter hubs - or "non-conventional" locations - were trading well.
Sales in the past 17 weeks were up 3%, owing to 18 new store openings, a successful partnership with Moto service stations and an extension of Greggs-branded frozen food sold in Iceland supermarkets. That means 75% of new stores will be located away from the high street, with an increase in promotions, following successful breakfast and lunch meal deals.
Whiteside said: "We do not think the supermarket sales are cannibalising our own store sales. We've looked at this very closely but cannot find any evidence of this. They are two separate markets." Whiteside said: "There's a growing trend of people shopping online, which means they are not going to the high street."
Patrick Coffey, analyst at Liberum Capital, revised down his profit forecast by 7.5% to £46.1m, saying he expected consensus to be cut by 10%. Sales in the past 17 weeks were up 3%, as a result of 18 store openings, a successful partnership with Moto service stations and an extension of Greggs-branded frozen food sold in Iceland supermarkets.
He said: "There is a high level of uncertainly surrounding the aggressive discounting from competitors, declining footfall on the UK high street as well as the decline in current trading already seen this year." Whiteside said: "We do not think the supermarket sales are cannibalising our own store sales.
"We've looked at this very closely but cannot find any evidence of this. They are two separate markets."