Greggs forecasts first annual loss since 1984 after sales slump

The bakery chain Greggs is forecasting that the coronavirus pandemic will result in the company posting its first annual loss since the mid-1980s, while it does not expect pre-Covid profit levels to return until 2022 at the earliest.

Greggs annual sales slumped by more than £300m year on year in 2020, pushing it to forecast a £15m full-year loss, as coronavirus restrictions closed its shops and hit revenues.

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This would be the first annual loss for the retailer since it listed on the London Stock Exchange in 1984. Greggs said it does not expect profits to return to pre-Covid levels until 2022 at the earliest.

The company, which has more than 2,000 outlets in the UK, reported sales of £811m for the 53 weeks to 2 January, a 30% decline on the £1.16bn figure for 2019.

Greggs said that its fourth-quarter sales averaged 81% of the equivalent 2019 level, while it had to manage variable trading conditions across the UK.

Its chief executive, Roger Whiteside, said that the impact of Covid-19 had been “enormous” but the retailer had changed its working practices to allow it to provide takeaway food under different levels of government coronavirus restrictions.

“The breadth of Greggs’ customer base provides ongoing demand for our services which, combined with our diverse geographical spread, has demonstrated the resilience of our business,” Whiteside said.

The company’s forecast of a £15m loss for 2020 marks a reversal of fortunes for the bakery chain, with its sales exceeding £1bn in 2018 and 2019.

In recent years, Greggs has been on a roll thanks to the success of its takeaway food products including the vegan sausage roll.

As coronavirus restrictions have kept consumers at home, Greggs has been working to offer a delivery service through a partnership with the food courier Just Eat. However, delivery sales in the fourth quarter were only equivalent to 5.5% of company-managed shop sales.

Greggs also offers products to bake at home through a partnership with the supermarket chain Iceland.

The company has resumed opening new shops where it sees an opportunity and said stores accessible by car are performing particularly well. During 2020 it opened 84 new shops, including 35 franchised units, and closed 56, bringing the total to 2,078 stores.

The pandemic has also prompted job losses at the bakery chain and Greggs confirmed that it had made 820 staff redundant in 2020 as it looked to cut costs.

Greggs has warned that social restrictions and uncertainty over their duration makes it hard to predict its future performance, although it intends to open 100 new stores during 2021.

Greggs “cooked up a good fourth-quarter trading performance”, said Ross Hindle, an analyst at the research firm Third Bridge, “driven by a local town store footprint, keeping stores open during the second lockdown, drive-through capabilities, plus a big push into delivery and collect”.

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