Greggs forecasts £15m loss as sales decline slows

High Street bakery chain Greggs said profits would not return to pre-coronavirus levels until 2022 at the earliest and forecast a loss of up to £15m this year.

The Newcastle-based company on Wednesday said fourth quarter like-for-like sales to January 2 at its managed stores slumped almost a fifth to £293m from £344m, although this was a slower decline and an improvement from 71.2%of 2019 levels in the third quarter. In the five weeks to January 2 like-for-like sales fell 14%.

Fiscal year total sales fell to by a third to £811m from £1.16bn. Greggs reported a profit of £114.2m a year ago.

The company also confirmed the 820 job losses forecast in November as the lockdown imposed in March saw its stores shuttered.

"Looking ahead, the significant uncertainty over the duration of social restrictions, along with the impact of higher unemployment levels, makes it difficult to predict performance. However, we do not expect that profits will return to pre-Covid levels until 2022 at the earliest," the company said in a trading statement.

The company, best known for its vegan sausage rolls, which had proved to be a sales success before Covid-19 hammered the retail sector, said it opened 84 new shops during 2020 and closed 56, bringing the total estate to 2,078. Greggs plans to open another 100 shops this year.

“Whilst the impact of COVID-19 has been enormous, we have established working practices that allow us to provide takeaway food services under the different levels of restrictions we have experienced,” said chief executive Roger Whiteside.

He added that the tie-up with delivery company Just Eat and a partnership with the supermarket Iceland to sell its products for baking at home had also helped boost sales.

He added that there were also “good opportunities” for new shops, “with those sites accessed by car performing particularly well".

Greggs ended the 2020 financial year with a net cash position of £37m, having repaid cash due to the Bank of England under the Covid credit finance facility and replaced it with a three-year, £100m revolving credit facility with a syndicate of lending banks.

Shore Capital analysts Clive Black and Darren Shirley said that the latest lockdown imposed on January 4 meant Greggs’ 2021 performance "will also be heavily negatively impacted by the disease" and rated the shares as a 'sell'.

"Indeed, we see Greggs’ whole market as being distorted by the pandemic as working from home becomes more structural, which hits travel hub and central business district trade volumes and, we believe, makes suburban demand more challenging too for the business, noting it may benefit from some capacity reduction in its markets too, so share gain of a smaller cake," they said in a note.

"As such, the pandemic is not a reason for Greggs to be regarded as the premium stock that it was in 2019 and whilst a vaccine will, hopefully bring some relief for Greggs and wider society, the legacy of Coronavirus upon society, its ways of living and working, works against Greggs’ prevailing business model to us."