Greggs in delivery push as H1 sales top £546m

Newcastle-based bakery and food retailer Greggs said on Tuesday it made underlying pretax profit of £55.5 million in the six months to July 3 versus a loss of £64.5 million in the same period of 2020 and profit of £40.7 million in H1 of 2019 before the pandemic.

The news came as Greggs unveiled a big push into delivery sales with partner Just Eat.

Greggs said it now expects full year profit to be slightly ahead of its previous expectations.

Analysts’ average forecasts have been for a profit of £130 million compared to a £13.7 million loss in 2020.

Total first half sales for 2021 were £546.2 million pounds, compared to £300.6 million pounds in 2020 and £546.3 million in 2019.

Like-for-like sales were down 9.2% on the same period of 2019.

Greggs last paid a dividend in October 2019, after which the planned final dividend for 2019 was cancelled in order to preserve cash in the early months of the pandemic.  

But on Tuesday it declared an interim dividend of 15p and said it intends to target a full-year ordinary dividend that is around two times covered by underlying earnings.

The board acknowledges that the business will be carrying a higher-than-normal cash balance in the short term but believes this is a prudent position to adopt given the backdrop, and intends to return any surplus cash to shareholders in due course, in line with its longstanding policy,” wrote Greggs CEO Roger Whiteside in his report.

Greggs said 48 new shops opened in the first half and it had 2,115 shops as at July 3.

It anticipates 100 net new shop openings in 2021 which will create 500 new retail roles in the second half of the year.

Greggs said delivery service is now available from 837 shops with delivery sales representing 8.5% of company-managed shop sales in the first half of 2021.

“Alongside estate expansion to serve our walk-in customers, Greggs has invested to meet customer needs for food via new channels and at additional times of the day,” said Greggs.

“The most developed of these is our delivery partnership with Just Eat …

“Customers are becoming more used to pre-ordering food, either for delivery or to guarantee availability when they ‘click and collect’ …

“Pre-ordering is a market trend that we believe will support, in particular, our ambition to grow sales in the evening daypart, a segment of the market where we are currently underrepresented.

“Delivery will also have a role to play here, giving customers convenient access to Greggs’ products wherever they are throughout the day.”

On the firm’s outlook, Whiteside said: “As we reported in our most recent trading update the level of sustained sales recovery in recent months was stronger than we had anticipated. 

“In the most recent four weeks to 31 July, like-for-like sales in company-managed shops, measured on a two-year basis, were 0.4 per cent above the equivalent period of 2019.

Despite the general uncertainties in the market, Greggs has traded well in recent months and demonstrated the resilience of its business model as well as its potential for longer-term growth as a multi-channel food-on-the-go brand. 

“As a result, we now expect full year profit to be slightly ahead of our previous expectation.”