Greggs (GRG) boss Roger Whiteside has insisted a Brexit-inspired economic downturn will not derail the baker’s shift towards offering healthier eating options.
Greggs today announced a 6% sales increase to £422m in the first half, driven by the continued expansion of its healthy range of sandwiches and the popularity of its breakfast offer.
Like-for-like sales were also up 3.8% in the 26 weeks to 2 July and underlying operating profits rose 6.7% to £27.2m.
Whiteside said Greggs was “alert to any change in consumer demand that may result from the current economic uncertainty”, but he insisted to journalists its was well placed to ride out any economic dip.
“If conditions are tougher, we’ve shown previously that we can react accordingly,” he said.
He admitted that, as seen in the last recession, an economic downturn could result in a drop in food to go sales as consumers prepare sandwiches at home and are less inclined to treat themselves to a cup of coffee.
However, he pointed out that the fundamental consumer shifts towards healthier options and freshly-made products were here to stay.
“Consumers alive to challenges around making sensible eating choices,” he said. “There is no question that is an underlying trend and is not a flash in the pan”.
He added that Gregg’s investment plans – including the target of opening 1,000 UK stores and the rollout of store refreshes – remained unchanged despite the Brexit-driven uncertainty.
During the first half exceptional costs of £4.8m dented pre-tax profits, which dipped slightly compared with a year ago to £25.4m despite the business netting £2.2m from a property sale.
Greggs is in the middle of a restructuring plan which involved the closure of three bakery manufacturing sites as it continues its transformation to a food-to-go operator. Redundancy costs make up the majority of the exceptional items, with another £2.8m expected in the second half.
Whiteside said there was likely to be a rise in input costs in the second half and beyond and the deflation that has gripped the food and drink sector eases, partly as a result of Brexit.
However, Greggs said that although currency impacts are likely to affect input costs towards the end of 2015 it has “forward cover” in terms of currency hedging for most of the second half.
Greggs opened 68 new shops and closed 36 in the half, giving a total of 1,730 outlets trading at the period end. The business expects to open around 70 net new shops over the year as a whole. It also completed 86 shop refurbishments of the planned 200 for the year.
Whiteside added the business had made an “encouraging” start to the second half of the year.
“Overall, we expect to deliver full-year growth in line with our previous expectations as well as further progress against our strategic plan.”
Shares in Greggs eased back 1% to 1,041.6p on slight market worries about future earnings guidance, but the shares have recovered from slumping to 869p immediately after the Brexit result.