Greggs PLC slumps to loss, plans 100 new shops after cutting 820 jobs

() slumped to a full-year loss, announced plans to open 100 new company-managed shops this year, and revealed it has cut 820 jobs.

The baker forecast capital expenditure of £70mln for 2021, which will also cover completion of the Balliol Park automated cold store, increases to manufacturing capacity for savoury products and a return to the previous rate of expansion of its shop estate.

READ: Greggs warns on profits and cuts 820 jobs due to lockdown impact

However, following consultation with union and employee representatives, it made 820 redundancies, which will come with a one-off cost of £10mln but will lower annual employment costs by £14mln.

Last year, the FTSE 250 firm closed 56 shops permanently and opened 82 new ones, bringing the total UK estate to 2,078 shops as of January 2.

The new financial year started better than expected, following “good progress” through the second half of 2020, the chain commented.

Trading was challenged by lockdown conditions especially in Scotland, where stores have been closed to walk-in customers. 

In the ten weeks to March 13, company-managed shop like-for-like sales fell 29% compared to the same period last year. Excluding Scotland, they were down 22%. 

Delivery sales have been strong and were a tenth of total sales, with the stores served by Just Eat expected to rise from the current 600 to 800 later in 2021.

In the 53 weeks to January 2, total sales, including franchisees, tumbled 31% to £811mln so Greggs slumped to a £13mln loss before tax from a £108mln profit last year.

Profits were impacted by write-offs and stock provisions of £9mln, impairment charges of £5mln arising from store closures and of £9mln from shops that are still operating but are unlikely to recover the full carrying value of their assets. There were also £9mln extra costs for Coronavirus (COVID-19) safety requirements.

Conversely, Greggs has benefitted from furlough support for staff who are shielding or can’t work because of restrictions as well as £19mln in business rates relief.

The board did not recommend a final dividend.

“Although the crisis is likely to prove a temporary interruption to our insatiable demand for sausage rolls rather than a sign of dramatically changing tastes, it is quite a sustained break, and it’s going to take a toll: Greggs has previously said it doesn’t expect a return to pre-Covid levels of operations until 2022 at the earliest,” commented Susannah Streeter, analyst at Hargreaves Lansdown.

“Flaky sales are likely to continue into the second half of 2021 given lockdown 3 and there has been a particular dent to business in Scotland with shops closed to walk in customers since the start of the year. But the introduction of the mass vaccine programme has given investors confidence that it will bring home the bacon once more as the recovery continues.”

Shares jumped 5% to 2,309.8p on Tuesday morning.

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