Greggs warns its outlook is uncertain due to increased restrictions
29th September 2020

Fears for the future of Greggs as it warns of near 30% sales slump and cuts staff hours in bid to ‘minimise job losses’ as new Covid restrictions kick in

  • High street bakery chain said it is in talks with staff over cutting employee hous
  • It wants ‘to minimise risk of job losses’ when furlough scheme ends next month
  • Closure of seated areas meant it was unable to benefit from Eat Out to Help Out
  • Newcastle-based firm says the hot weather also made August a ‘difficult month’ 

Greggs has warned its outlook is uncertain due to increased coronavirus restrictions put on customers after sales slumped by 30 per cent since it reopened in July.

The high street bakery chain said it is in talks with staff over cutting employee hours ‘to minimise the risk of job losses’ when the furlough scheme ends next month.

Food-to-go specialist Greggs said it suffered a ‘challenging month’ in August, as the closure of seated areas meant it was unable to benefit from Eat Out to Help Out.

High temperatures also made August a ‘difficult month’ for trading, but more people ate outside of their homes in September which it believes drove improvements.

In comes in the context of a bloodbath on the high street, with 192,831 job losses announced by major British employers since the start of the lockdown in March. 

Since reopening on July 2, the Newcastle-based firm’s like-for-like sales averaged at 71.2 per cent of its levels from 2019 for the 12-week period to September 26.

High street bakery chain Greggs said sales have picked up over the past month but August was a ‘challenging month’. One of the firm’s stores in Leeds is pictured on June 18 after it opened

In the past month, covering the four weeks to September 26, like-for-like sales were at 76.1 per cent of its levels from the same period last year, as trading improved.

The company said it has reviewed its trading operations as it looks to ensure its ’employment costs reflect the estimated level of demand from November onwards’.

Analysis: Greggs firms up flaky sales with a shift to click and collect

By SUSANNAH STREETER

Greggs had very flaky sales during August as warm temperatures put customers off its hot pastries and it was unable to benefit from the Eat Out to Help out scheme as seats weren’t available in its outlets. 

September has seen its stores bringing home the bacon again though, as more people left home and popped in or picked up products using its click and collect service, which has been rolled out nationwide. 

Sales had crumbled earlier in the summer but over the four weeks to 26 September, like-for-like sales had recovered to 76.1 per cent of the level the firm saw this time last year. 

Customers are being rewarded with the return of its celebrated Belgian bun as the firm brings back a broader range of its products.

Greggs shows it is keeping up with the nation’s changing appetite for online sales, and now customers can also order Greggs deliveries on the Just Eat app in many cities. 

The pandemic has still taken a big bite out of business and with trading activity expected to remain below normal for the foreseeable future, some employees are being asked to reduce their hours to compensate and minimise job losses. 

But Greggs has taken its expansion programme out of the freezer and plans to open 20 new shops which can be easily accessed by car, to take advantage of changing snacking and shopping habits.

Spikes of infection rates are also having an impact on its supply chain with disruption to a distribution centre in Leeds and a factory in Newcastle after small outbreaks. 

The company says there is a risk of low-level disruption through the coming months. 

Greggs returned to a positive net cash position during September and the success of the shift to digital sales is likely to be key for Greggs as it needs to operate at 80 per cent of 2019 sales to break even. 

The chain’s clever advertising campaigns have successfully targeted lunchtime workers over the past few years, but with millions forced to work from home, it will have to double its efforts to pitch its pastries to different markets.

Susannah Streeter is a senior investment and markets analyst at Hargreaves Lansdown

Greggs told investors its ‘immediate priority’ is to complete the consultation and confirm the financial impact of the move when the consultation ends in November.

The update came as the chain said that sales have picked up over the past month, as it continues its recovery following the coronavirus pandemic.

Greggs said its digital business is ‘developing quickly’ after increased investment during the lockdown period, partnering with food delivery operator Just Eat.

Its home delivery represented 2.6 per cent of shop sales in the week to last Saturday, while a click and collect service is now available in all shops. 

Greggs, best known for its sausage rolls and vegan snacks, said it had launched a consultation with union and employee representatives.

‘Our aim is to minimise the risk of job losses by negotiating reduced hours in our shops,’ it said.

Looking beyond the pandemic, Greggs is restarting its shop opening programme, and now expects about 20 net openings in 2020. 

A spokesman added: ‘The outlook for trading remains uncertain, with rising Covid-19 infection rates leading to increasing risks of supply chain interruption and further restrictions on customer activities out of the home.

‘In these challenging conditions our teams continue to work hard and have proven our ability to operate with social distancing and adapt to new digital channels.’

Last week Prime Minister Boris Johnson told Britons to work from home where possible and ordered restaurants and bars to close early to tackle a spike in the pandemic, with new restrictions likely to last six months.

The government has said it is also mulling tougher restrictions.

Greggs was performing well before the crisis its shares hit a record high of 2,550p in January. But they closed yesterday at 1,219p, down 47 per cent in the year to date.

In January, thousands of Greggs staff were told they would receive a £300 one-off payment after a ‘phenomenal year’.

All employees at the firm shared a £7million payment after shareholders received a £35million special dividend last October.

Julie Palmer, partner at corporate restructuring firm Begbies Traynor, said today: ‘This crisis has affected all businesses, and Greggs is no different. 

‘In the process of becoming a high street icon in recent years it was able to give all its staff a £300 bonus in January, but that card has completely turned with consultations taking place over the future of many jobs.

‘While the bakery was almost a perfect, efficient business model before the pandemic, it is ill equipped to thrive during it. 

‘Greggs has suffered from not being eligible for Eat Out To Help Out and its partial reliance on city centres being filled with office workers on their lunch breaks. As such, it has been a struggle to get back into profit, but September is showing recovery with loyal customers, or even fans, helping its cause.

An employee at a branch of Greggs in Leeds carries a tray after the store reopened on June 18

‘Greggs will undoubtedly survive and be able to thrive once again, but its struggles tell the story of every business in the UK. What worked before the pandemic may not work during it. 

‘It, like many others, must adapt and change to the way that the world now works. The bonus is that this will make the business stronger for when the crisis is over.’

Last week an outbreak of coronavirus stopped pasty production at a Greggs factory in Newcastle, although the chain said it did not foresee any stock shortages in shops.

The economy shrank by more than 25 per cent in March and April after lockdown was introduced – closing down shops, offices, factories and other places of work.

But output has risen by 18.6 per cent over the following three months as restrictions were eased and the economy began to reopen.

Greggs said its digital business is ‘developing quickly’ after increased investment during the lockdown period, partnering with food delivery operator Just Eat (pictured last week)

Figures from the Office for National Statistics earlier this month showed retail sales grew for a fourth month in a row in August as households splashed out.

But business leaders have warned that a second coronavirus lockdown would ‘cripple’ the economy.

The Centre For Retail Research said yesterday that fashion, home and non-food retailers have lost £9billion in sales so far this year, which could lead to one in ten stores never being used to sell goods again.

Its report also found nearly 14,000 shops have permanently closed this year – up almost 40 per cent on the same period a year ago – and predicts as many as one in 10 store sites may never sell goods again.

Cheap meals during Eat Out to Help Out pushed inflation down to its slowest rate in five years, as the cost of living climbed by just 0.2 per cent year on year in August.

The scheme gave customers 50 per cent off their food, up to £10 each, on Mondays to Wednesdays in August, and more than 100 million meals were claimed.

Nearly 200,000 job losses revealed by UK firms since lockdown began 

Some 192,831 job losses have been announced by major British employers since the start of the lockdown in March as follows:

  • September 22 – Wetherspoon – 400 to 450
  • September 22 – Whitbread – 6,000
  • September 18 – Investec – 210
  • September 15 – Waitrose – 124
  • September 14 – London City Airport – 239
  • September 9 – Lloyds Bank – 865
  • September 9 – Pizza Hut – 450
  • September 4 – Virgin Atlantic – 1,150
  • September 3 – Costa – 1,650
  • August 27 – Pret a Manger – 2,800 (includes 1,000 announced on July 6)
  • August 26 – Gatwick Airport – 600
  • August 25 – Co-operative Bank – 350
  • August 20 – Alexander Dennis – 650
  • August 18 – Bombardier – 95
  • August 18 – Marks & Spencer – 7,000
  • August 14 – Yo! Sushi – 250
  • August 14 – River Island – 350
  • August 12 – NatWest – 550
  • August 11 – InterContinental Hotels – 650 worldwide
  • August 11 – Debenhams – 2,500
  • August 7 – Evening Standard – 115
  • August 6 – Travelex – 1,300
  • August 6 – Wetherspoons – 110 to 130
  • August 5 – M&Co – 380
  • August 5 – Arsenal FC – 55
  • August 5 – WH Smith – 1,500
  • August 4 – Dixons Carphone – 800
  • August 4 – Pizza Express – 1,100 at risk
  • August 3 – Hays Travel – up to 878
  • August 3 – DW Sports – 1,700 at risk
  • July 31 – Byron – 651
  • July 30 – Pendragon – 1,800
  • July 29 – Waterstones – unknown number of head office roles
  • July 28 – Selfridges – 450
  • July 27 – Oak Furnitureland – 163 at risk
  • July 23 – Dyson – 600 in UK, 300 overseas
  • July 22 – Mears – fewer than 200
  • July 20 – Marks & Spencer – 950 at risk
  • July 17 – Azzurri Group (owns Zizzi and Ask Italian) – up to 1,200
  • July 16 – Genting – 1,642 at risk
  • July 16 – Burberry – 150 in UK, 350 overseas
  • July 15 – Banks Mining – 250 at risk
  • July 15 – Buzz Bingo – 573 at risk
  • July 14 – Vertu – 345 July 14 – DFS – up to 200 at risk
  • July 9 – General Electric – 369
  • July 9 – Eurostar – unknown number
  • July 9 – Boots – 4,000
  • July 9 – John Lewis – 1,300 at risk
  • July 9 – Burger King – 1,600 at risk
  • July 7 – Reach (owns Daily Mirror and Daily Express newspapers) – 550
  • July 6 – Pret a Manger – 1,000 at risk
  • July 2 – Casual Dining Group (owns Bella Italia and Cafe Rouge) – 1,909
  • July 1 – SSP (owns Upper Crust) – 5,000 at risk
  • July 1 – Arcadia (owns TopShop) – 500
  • July 1 – Harrods – 700
  • July 1 – Virgin Money – 300
  • June 30 – Airbus – 1,700
  • June 30 – TM Lewin – 600
  • June 30 – Smiths Group – “some job losses”
  • June 25 – Royal Mail – 2,000
  • June 24 – Jet2 – 102
  • June 24 – Swissport – 4,556
  • June 24 – Crest Nicholson – 130
  • June 23 – Shoe Zone – unknown number of jobs in head office
  • June 19 – Aer Lingus – 500
  • June 17 – HSBC – unknown number of jobs in UK, 35,000 worldwide
  • June 15 – Jaguar Land Rover – 1,100
  • June 15 – Travis Perkins – 2,500
  • June 12 – Le Pain Quotidien – 200
  • June 11 – Heathrow – at least 500
  • June 11 – Bombardier – 600
  • June 11 – Johnson Matthey – 2,500
  • June 11 – Centrica – 5,000
  • June 10 – Quiz – 93
  • June 10 – The Restaurant Group (owns Frankie and Benny’s) – 3,000
  • June 10 – Monsoon Accessorise – 545
  • June 10 – Everest Windows – 188
  • June 8 – BP – 10,000 worldwide
  • June 8 – Mulberry – 375
  • June 5 – Victoria’s Secret – 800 at risk
  • June 5 – Bentley – 1,000
  • June 4 – Aston Martin – 500
  • June 4 – Lookers – 1,500
  • May 29 – Belfast International Airport – 45
  • May 28 – Debenhams (in second announcement) – “hundreds” of jobs
  • May 28 – EasyJet – 4,500 worldwide
  • May 26 – McLaren – 1,200
  • May 22 – Carluccio’s – 1,000
  • May 21 – Clarks – 900
  • May 20 – Rolls-Royce – 9,000
  • May 20 – Bovis Homes – unknown number
  • May 19 – Ovo Energy – 2,600
  • May 19 – Antler – 164
  • May 15 – JCB – 950 at risk
  • May 13 – Tui – 8,000 worldwide
  • May 12 – Carnival UK (owns P&O Cruises and Cunard) – 450
  • May 11 – P&O Ferries – 1,100 worldwide
  • May 5 – Virgin Atlantic – 3,150
  • May 1 – Ryanair – 3,000 worldwide
  • April 30 – Oasis Warehouse – 1,800
  • April 29 – WPP – unknown number
  • April 28 – British Airways – 12,000
  • April 23 – Safran Seats – 400
  • April 23 – Meggitt – 1,800 worldwide
  • April 21 – Cath Kidston – 900
  • April 17 – Debenhams – 422
  • March 31 – Laura Ashley – 268
  • March 30 – BrightHouse – 2,400 at risk
  • March 27 – Chiquito – 1,500 at risk

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