Greggs profit to beat expectations after sales revive

Greggs said annual profit could be similar to 2019 and was likely to materially beat its expectations after sales returned to growth following the relaxation of Covid-19 restrictions.

The food on-the-go group said like-for-like sales fell 3.9% in the eight weeks to 8 May from two years earlier and by 13.5% in the 18 weeks to that date. Like-for-like sales rose after non-essential retailers reopened on 12 April.

Total sales in the 18 weeks to 8 May were £352m compared with £280 million a year earlier and £373m in the same period of 2019, Greggs said in a trading update brought forward from 13 May.

The company's shares rose to a record high of £25.71 in early trading and were up 7.6% to £25.23 at 08:45 BST.

Greggs, known for its sausage rolls and pasties, said the pick-up in sales was partly due to the reopening of non-essential retail after three months of lockdown and the unleashing of pent-up demand as shoppers hit the high street. Deliveries, introduced during the pandemic, remained popular and accounted for 8.2% of sales in the past eight weeks.

The FTSE 250 company said the trading environment was highly unusual and hard to predict. It said relaxation of restrictions on eat-in cafes and restaurants would create extra competition but that it was pleased with progress.

Greggs said: "Sales have recovered well in recent weeks as out-of-home activity levels have increased, albeit in the absence of competition from indoor seated catering operators. If restrictions continue to ease in line with current plans then we now expect our overall sales performance for the year to be stronger than we had previously anticipated.

"Providing guidance on the profit outcome for 2021 remains difficult given the uncertainties surrounding trading conditions. However, given our recent trading performance, the board now believes that profits are likely to be materially higher than its previous expectation, and could be around 2019 levels in the absence of further restrictions."

Shore Capital analyst Clive Black said: "An impromptu trading statement suggests positive recent trading and materially increased management confidence. All credit to Greggs for engineering such a position in the face of material adversity over the past year or so of the pandemic."

But Black stuck with his 'sell' recommendation and said Greggs was overvalued. He questioned whether, like most UK supermarkets, Greggs would feel compelled to repay government support during the pandemic. "It would be inconceivable for the group to declare a dividend whilst taking such state aid in our view," Black said.