Greggs expects first annual loss after sales slump since 1984

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Not expected to return to pre-Covid levels at the earliest until 2022

Bakery chain Greggs has estimated that the coronavirus pandemic will result in the company reporting its first annual loss since the mid-1980s, though at the earliest it does not plan to return to pre-Covid profit levels by 2022.

Compared to the previous year, Greggs’ annual revenues fell by more than £ 300 million in 2020, leading the company to estimate an annual loss of £ 15 million as coronavirus restrictions led to store closures and affected revenue.

This will be the retailer’s first annual loss since it listed in 1984 on the London Stock Exchange.

For the 53 weeks ended Jan. 2, the company, which operates more than 2,000 stores in the U.K., posted revenue of £ 811 million, down 30 percent from £ 1.16 billion in 2019.

“We do not expect profits to return to pre-Covid levels until 2022 at the earliest.”We don’t expect earnings to return to pre-Covid levels until 2022 at the earliest.
Greggs said its revenues in the fourth quarter averaged 81% of the comparable amount for 2019, a rise from 71.2% in the previous quarter, while grappling with variable trading conditions across the UK.

The effect of Covid-19 was “huge” said its chief executive, Roger Whiteside, but the retailer had modified its working practices to allow it to supply takeaway food under various levels of government restrictions on coronavirus.

“The breadth of Greggs’ customer base provides continued demand for our services, which combined with our diverse geographic distribution has proven the resilience of our business,” Whiteside said.

The company’s shares jumped nearly 9 percent in early trading Wednesday, amid the grim outlook for Greggs’ full-year performance, making the retailer the biggest increase on the FTSE 250 index.

Investors were bolstered by reports that as stores reopened, Greggs sales recovered faster than anticipated, combined with the sales from its home delivery service.

The company’s prediction of a £ 15 million loss for 2020 represents a turnaround for the bakery chain, whose profits in 2018 and 2019 exceeded £ 1 billion.

Thanks to the popularity of its takeaway products, including the vegan sausage roll, Greggs has been on a roll in recent years.

As coronavirus restrictions have kept customers at home, through a collaboration with food courier Just Eat, Greggs has been working to provide a delivery service. In the fourth quarter, however, delivery revenue reflected just 5.5 percent of company-owned store sales.

Greggs also sells home baking products through a collaboration with Iceland’s supermarket chain.

The organization has resumed opening new stores where it sees an opportunity, and said car-accessible stores are doing especially well.

In 2020, 84 new stores were opened, including 35 franchised units, and 56 were closed, taking the total to 2,078 stores.

The pandemic has also led to job losses in the bakery chain, and Greggs has reported that 820 staff will be laid off to lower costs in 2020.

Greggs cautioned that it was difficult to forecast future results due to social retrenchment, confusion about its length and the effects of higher unemployment, while the company plans to open 100 new stores in 2021.

In the fourth quarter, Greggs “performed well in the fourth quarter,” said Ross Hindle, an analyst at Third Bridge research company, “driven by its presence in cities, keeping stores open during the second closure, drive-through opportunities and a big push into delivery services.”

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