Greggs swings to £65m loss during coronavirus crisis
Greggs swung to a loss of more than £65m for the six months to 27 June after Brits tried their own hand at baking during lockdown, it revealed today.
The results
Greggs swung to a pre-tax loss of £65.2m, down from a profit of £36.7m in the same period last year.
Total sales for the six months to 27 June dropped 45 per cent year on year to £300.6m, down from £546.3m last year.
The bakery chain said company-managed shop sales were down 49 per cent on a like-for-like basis.
Net debt for the six months stood at £26.2m, reflecting operating cash outflows and issue of £150m of Covid Corporate Financing Facility (CCFF) commercial paper.
Greggs suspended its interim dividend, citing financial uncertainty due to the Covid-19 crisis.
Shares rose 2.1 per cent to 1,489.53p in morning trading.
Why it’s interesting
Greggs was on track to deliver strong progress in the first few months of the year, , but saw all its growth wiped out by the implementation of a nationwide lockdown in March.
For the first nine weeks of 2020, Greggs had notched 7.5 per cent growth in like-for-like sales, and total sales were up 11.5 per cent.
However, the bakery chain was forced to shut its entire shop estate on 23 March to comply with the government’s “stay at home” message.
Greggs immediately made use of the Coronavirus Job Retention Scheme and furlough staff. The firm also scrapped the planned final dividend for 2019, cancelled annual pay increases, and froze all but essential expenditure.
Since beginning to reopen shops in early May, Greggs has now seen its business return to 72 per cent of trading levels seen this time last year.
Julie Palmer, partner at business advisory and restructuring firm Begbies Traynor, said: “The success of Greggs has been the envy of the high street in recent years, however, even the bakery chain hasn’t been immune to the impact of Covid-19 which has forced its stores to close and eaten away at its top line.
“For Greggs, achieving rent reductions from landlords will be first on the tick list, and indeed this has been a priority for many on the high street. But once these costs have been reduced its push to return to success will begin.
“And given its track record of marketing & PR success with its famous vegan sausage roll, I wouldn’t be surprised to see another high profile campaign on the horizon that captures the sentiment of a nation experiencing seismic change.”
All UK Greggs shops are now reopen for takeaway. In anticipation of lower-than-normal sales levels under social distancing, the group has limited its initial product range to focus on best sellers.
What Greggs said
Roger Whiteside, chief executive of Greggs, said:
“Following successive years of unbroken growth Greggs made a great start to 2020, coming into the year with momentum and clear strategic plans. The strength of our business model enabled us to secure the liquidity needed to support our business through the current crisis and then to adapt our operation and strategic investment plans in response to the new environment.
“I want to thank the amazing team of people in our business who have risen to the challenges created by this crisis both in supporting the wider community and working together to redesign our operation to work safely under these new conditions.
“Greggs is now well prepared to deal with the challenges of social distancing and operate through the conditions we are faced with. Greggs remains a much-loved brand with long-term growth opportunities and the business is better placed to adapt to new conditions than ever before.”