Greggs profits still on a roll with a boom in its vegan snacks

‘Grab-and-go’ chain announces exceptional year with 27% rise in pre-tax profits but warns floods may hit sales

Greggs made record profits in 2019, the year that it launched its popular vegan sausage roll, but the Newcastle-based company said the storms and flooding that battered Britain in recent weeks have put the brakes on sales.

The bakery chain said the wettest February since records began had caused a “significant” slump in sales. The flooding in south Wales caused the temporary closure of its bakery and distribution centre in Treforest, as well as 40 Welsh stores.

Greggs makes its vegan doughnuts at Treforest but the production line was damaged by floodwater, taking the treat off the menu for several weeks until it can be repaired. Despite the upheaval, sales at stores open more than a year were up 7.5% in the nine weeks to 29 February 2020.

The update came as Greggs posted a 27% rise in 2019 pre-tax profits excluding one-off charges to £114.2m. Like-for-like sales grew by a record 9.2%.

Roger Whiteside, Greggs chief executive, said the coronavirus outbreak could hit future sales if lots of people stopped travelling to work.

“The bit we have no control over is demand,” he said. “If there is some sort of widespread contagion how might that affect the way people behave? We just don’t know that really.”

Whiteside has said the company would pay staff who have to self-isolate because of coronavirus. “Our default position is that we pay contract hours. We don’t have any zero-contract hours,” he told the BBC.

Greggs has been a rare high street success story due to its changing menu that tapped into the growing popularity of plant-based diets with a vegan range which includes a sausage roll, “steak bake” and doughnut. Despite the shift, its traditional pork sausage rolls are still one of its bestsellers, with 2.5m sold every week.

Greggs is now trading from 2,050 shops, up nearly 100 from the previous year, and is rolling out a delivery service in partnership with Just Eat. The company is considering paying another special dividend and will make an announcement in July. Last year, it paid out £35.5m to shareholders via a special dividend.

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Its 25,000 staff were each handed a £300 “thank you” bonus in January, although some workers got to keep just a quarter of the bonus as a result of universal credit deductions. Greggs said it would share a further £12.8m of profits with employees. All staff benefit from the 10% profit-share agreement. The amount they receive will depend on how long they have worked for the company and how many hours they work.

While conditions for UK retailers remain tough amid fragile consumer confidence and the shift to online shopping, the food-on-the-go sector continues to grow. It is thought to be worth £24bn and grew by 3.7% last year, according to market research firm NPD.

John Moore, senior investment manager at Brewin Dolphin, said: “The baker has shown that the hype around the vegan steak bake last year was no one-off hit. The dreadful weather impacting on sales in February and potential disruption from coronavirus to come – are reminders that, despite the internal hard work, external factors can heavily influence the business.”

Contributors

Julia Kollewe and Zoe Wood

The GuardianTramp

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