The bakery chain Greggs has predicted the coronavirus pandemic will result in the company’s first ever annual loss, while it does not expect profits to recover until 2022.
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. The company said it did not expect to return to pre-Covid levels of profit until 2022 at the earliest.
This would be the first annual loss for the retailer since it listed on the London Stock Exchange in 1984 and chief executive Roger Whiteside said he believed it would be the company’s first ever loss in the chain’s more than 80 years of existence.
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.
However, despite taking a financial battering in 2020, the company said it planned to open 100 more stores this year.
Greggs said its fourth-quarter sales averaged 81% of the equivalent 2019 level, an improvement on the 71.2% achieved in the previous quarter, while it had to manage variable trading conditions across the UK.
Whiteside, said 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.
Despite Greggs’ grim forecast for its full-year results, the firm’s shares jumped more than 10% on Wednesday, making the retailer the biggest riser on the FTSE 250 index.
Investors were encouraged by the news that Greggs’ sales recovered faster than expected when its stores were allowed to trade, combined with growing revenues from its home delivery service.
Greggs announced plans to extend deliveries to a further 200 outlets, taking the total to 800, and test a dinner menu for home delivery as well as opening a net 100 new outlets this year, up from just 28 in 2020.
The company said it was taking advantage of cheap rents being offered by landlords, particularly in city centres and spots where people could park cars.
Whiteside said the business wanted to open as many as outlets as possible in London, where it was underrepresented, including at major train stations.
“There is no question that, largely because of Covid, city centres will be impacted over the long term and there will be less working in offices than before and less shopping as people have discovered that home working and internet shopping is convenient,” he added.
“But it doesn’t mean city centres will be empty places … history shows city centres as the driving force of any economy and so they will come back even if it is at a lower level.”
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. Delivery sales in the fourth quarter were only equivalent to 5.5% of company-managed shop sales but Whiteside said he hoped to expand this by broadening the menu on offer and delivering from more stores.
Greggs is also extending the range of products to bake at home it sells through a partnership with the supermarket chain Iceland with vegan sausage rolls about to launch.
The pandemic also resulted in job losses at the bakery chain and Greggs confirmed it had made 820 staff redundant in 2020 as it looked to cut costs.