FDBusiness.com

Greggs, the leading bakery food-on-the-go retailer in the UK, with over 1,850 retail outlets, increased sales by 7.4% to £960.0 million in 2017. Within this company-managed shop like-for-like sales grew by 3.7%. Underlying operating profit, excluding property profits and exceptional items, grew by 4.6% to £81.7 million during the year. Pre-tax profit (including exceptional items) fell by 4.3% to £71.9 million. Strong cash generation is supporting Greggs’ investment programme for further growth.

Economic conditions became more challenging in 2017, with business cost inflation rising significantly due to food ingredient and labour cost increases affecting the entire sector. However, Greggs was able to leverage its scale and deliver productivity improvements to mitigate some of these pressures but, as expected, saw some year-on-year margin slippage. The market generally saw price inflation returning to the food sector, which resulted in a slowdown in disposable income growth for our customers.

Roger Whiteside, chief executive of Greggs.

Roger Whiteside, chief executive of Greggs, comments: “In 2017 we delivered another strong performance in challenging economic circumstances as rising inflation impacted both our own costs and customers’ disposable income. At the same time we continued to make good progress with our business transformation programme. Whilst the UK consumer outlook remains challenging, we are encouraged by the start to the year. 2018 will be the peak year for investment in our supply chain as we create the platforms for further growth. We also plan to open a record number of new shops as we implement our plan to grow Greggs as a leading food-on-the-go brand.”

In January 2017, Greggs outlined details of the next phase of its major investment programme focused on increasing logistics capacity and consolidating its manufacturing operations into centres of excellence in order to support shop growth. Once implemented this new supply chain platform will deliver improvements to product quality, competitiveness and, alongside systems investment, will complete the group’s transformation from traditional bakery to food-on-the-go.

Overall the expansion plans will create thousands of new roles in retail and distribution operations but will result in fewer jobs in manufacturing.

The investment phase is a complicated programme of work which will take until 2020 to complete. Greggs has made a good start in 2017, completing the transfer of its Edinburgh operations to its Glasgow bakery, which has been extended to become a centre of excellence for ‘Yum Yum’ production, and extending the Leeds bakery to create a centre of excellence for cake and muffin manufacturing.

The year ahead will be the peak year for investment in the programme including the creation of Greggs’ centre of excellence for doughnuts in our Gosforth Park bakery.

Greggs has made further significant progress in the fourth year of its major process and systems investment programme. In 2017, Greggs successfully deployed its largest ever systems roll out, replacing its traditional shop ordering with a new central forecasting and replenishment process. Benefits in improved product availability for customers have already been realised and Greggs expects to see savings start to come through in lower wastage figures.