Greggs shares fall amid COVID threats to trading, jobs

Shares of Newcastle-based bakery and food retailer Greggs fell about 8% on Tuesday after the firm published a third quarter trading update showing sales have averaged 71.2% of 2019 levels in the 12 weeks to September 26.

Greggs expects trading to remain below normal for the foreseeable future due to the COVID-19 pandemic.

Greggs warned of possible job losses among its 25,000 staff amid a “series of changes which are the subject of a collective consultation with union and employee representatives.”  

Greggs added: “Our aim is to minimise the risk of job losses by negotiating reduced hours in our shops and we will update on the outcome of the consultation when concluded.”

CEO Roger Whiteside told Reuters: “The dilemma here is about demand … If the customers aren’t there, there’s no point having the people there to serve them.

Asked how many of Greggs’ 25,000 workers would lose their jobs, Whiteside said: “It all depends on how many people say ‘OK I’m happy to do the fewer hours’.”

Greggs had an “exceptional” year in 2019 with sales up 13.5% to £1.167 billion and its share price touched a record high of about £25.50 in January this year to give it a stock market value of over £2.5 billion.

However, its share price during the pandemic has fallen to around £11.20 to cut its stock market value to about £1.2 billion.

In its outlook, Greggs said: “The outlook for trading remains uncertain, with rising COVID-19 infection rates leading to increasing risks of supply chain interruption and further restrictions on customer activities out of the home.”

On trading, Greggs said: “We saw activity levels increase as we came into September, following a more challenging month in August. 

“Since reopening our full estate on 2 July like-for-like sales in company-managed shops have averaged 71.2% of the 2019 level in the 12 weeks to 26 September. 

“In the most recent four weeks to 26 September like-for-like sales in company-managed shops have averaged 76.1% of the 2019 level, in line with our planning assumptions at this stage.”

On its shop estate, Greggs said: “In the 39 weeks to 26 September 2020 we have opened 38 new shops and closed 49 shops, giving a total of 2,039 shops (comprising 1,720 company-managed shops and 319 franchised units). 

“With greater clarity on activity levels we have reactivated elements of our shop opening pipeline and now expect to open a net 20 shops in 2020, predominantly in locations accessed by car.”

On its supply chain, Greggs said: “In August our supply chain team dealt with a small COVID-19 occurrence at our distribution centre in Leeds and worked closely with Leeds City Council and Public Health England to handle the situation swiftly and professionally.

“There was some impact to product availability in the region over a five-day period but this was minimised through support from other sites in the network.  

“In the past week we experienced a further occurrence at one of our manufacturing centres in Newcastle upon Tyne. 

“As a precaution this production operation was temporarily closed, although stock distribution is unaffected. 

“It seems likely that this pattern of disruption to supply-side operations will be an ongoing challenge as we prioritise employee safety and play our part in managing COVID-related risks.”