TIDMGRG
RNS Number : 9785N
Greggs PLC
05 October 2021
5 October 2021
GREGGS PLC
Q3 TRADING UPDATE & CAPITAL MARKETS DAY
Greggs is a leading UK food-on-the-go retailer,
with more than 2,100 retail outlets throughout the country
Continuing recovery and increasing potential for growth
Q3 highlights
-- Two-year LFL* for third quarter up 3.5% despite staffing and supply chain disruption
-- Delivery sales developing well, 943 shops now involved
-- 68 net new shops opened year-to-date (84 openings less 16 closures)
-- Continue to expect around 100 net shop openings in 2021
-- Broadening of vegan-friendly food and drink options well received
-- Inflationary pressures rising towards end of 2021
-- Expect full year outcome to be ahead of our previous expectations
* Like-for-like (LFL) company-managed shop sales performance
against comparable period in 2019
Strategic development
-- Strategic direction remains consistent - further growth in
the shop estate supplemented by development of new channels in the
food-on-the-go market
-- Ambitious target to double turnover over next five years to circa GBP2.4bn in 2026
-- Planning to accelerate rate of net shop number growth to
c.150 per year from 2022 with potential for at least 3,000
shops
-- Looking to develop multichannel sales by:
- extending evening trading to more shops
- building on initial successes in the online / delivery channel
- roll-out of the new Greggs app to more customers
-- Investment programme will equip shops for a multichannel
future and create additional supply chain capacity for growth
-- F urther improvement in sustainability of customer offer as we deliver on the Greggs Pledge
Trading performance
Despite widely reported disruption to staffing and supply
chains, it is a credit to our teams that Greggs has continued to
trade well over the third quarter with two-year like-for-like sales
in company-managed shops rising by 3.5 per cent when compared with
the same period in 2019. Growth was particularly strong in August
when a 'staycation' effect was evident and remained in positive
territory in September, with two-year like-for-like growth of 3.0
per cent in the four weeks to 2 October. Delivery sales have
continued to develop well, with 943 shops now involved in supplying
customers through this channel.
The broadening of our vegan-friendly food and drink options has
been well received, notably the limited edition 'Vegan Sausage,
Bean & Cheeze Melt' along with a 'Vegan Ham & Cheeze
Baguette' and a vegan-friendly breakfast sausage. Pizza and savoury
boxes are supporting the delivery channel and o ur autumn menu is
now available in shops, featuring favourites such as pumpkin spiced
latte and spooky bats and buns for Halloween.
Shop estate and supply chain development
In the year to date we have opened 84 new shops and closed 16
shops, giving a total of 2,146 shops trading at 2 October 2021
(comprising 1,785 company-managed shops and 361 franchised units).
Openings in the third quarter have included three drive-thru
locations and our first shop in London's Canary Wharf. For the year
as a whole, we continue to expect around 100 net openings, of which
half are planned to be with franchise partners.
Our new automated cold storage facility in Newcastle upon Tyne
has commenced operations and is performing well. This will create
additional capacity to support our growth ambitions whilst also
reducing logistics costs and carbon emissions.
Outlook
Greggs has not been immune to the well-publicised pressures on
staffing and supply chains and we have seen some disruption to the
availability of labour and supply of ingredients and products in
recent months. Food input inflation pressures are also increasing;
whilst we have short-term protection as a result of our forward
buying positions we expect costs to increase towards the end of
2021 and into 2022.
Operational cost control has been good and the strong sales
performance in the third quarter gives us confidence as we move
into the autumn. Subject to any unexpected COVID disruption we
expect the full year outcome to be ahead of our previous
expectations.
Capital Markets Day event
Today Greggs will host a 'Capital Markets Day' event during
which the Company's Operating Board will set out the considerable
opportunities that we see in the coming years. Our strategic
direction remains consistent - further growth in the shop estate
will be supplemented by development of new channels in the
food-on-the-go market.
Our success in recent years has enabled us to achieve a five per
cent share of the food-on-the go market, despite offering our
services primarily in the walk-in channel and limited to daytime
opening hours. As we scale Greggs to become a fully-fledged,
multi-channel, food-on-the-go brand for all times of the day we
have developed an ambitious target to double revenue to circa
GBP2.4bn by 2026.
Our plans are based on the further opportunities that we see for
Greggs in the UK market. In the long term we think there could also
be potential f or Greggs internationally; we are conducting some
very early analysis to help better understand the possible
opportunity.
The event content will be made available on our corporate
website ( https://corporate.greggs.co.uk/investors/results-centre )
and will focus on the following key opportunity areas:
-- Estate growth - we continue to see potential for at least 3,000 UK
shops and are challenging ourselves to increase the rate of net shop
number growth to 150 shops per year from 2022, of which around 50
per year are expected to be opened in partnership with franchisees.
The shape of the new shop pipeline reflects opportunities that have
been successful for us in recent years as we reposition the estate
towards on-the-go locations.
To help understand the different contributions from company-managed
and franchised shops the comparative performance of these two classes
of shop will be disclosed. On average, a company-managed shop generated
a cash return of 42 per cent on capital in 2019. In the same period
the average franchised shop generated a cash return of 33 per cent
on capital.
-- We see evening daypart sales as a significant opportunity for the
business, as we seek to replicate our success in the daytime beyond
traditional trading hours. The introduction of delivery services has
made many more of our shops viable in the early evening market and
we believe that two thirds of our estate will ultimately be suitable
for late trading (both walk-in and delivery). In the short term our
target is that 500 of our shops will be open until 8pm by the end
of 2022.
-- The opportunity to grow delivery sales reflects the expanding reach
of delivery services across the UK combined with the development of
our menu. More than 900 of our shops currently service the delivery
channel and we expect this to develop to around 80 per cent of the
company-managed estate in the years ahead. Our menu already has great
relevance in the early evening daypart and will benefit from planned
development of further hot food options. Our success to date has been
almost exclusively in the daytime delivery market so evening trading
presents further potential. Alongside delivery, 'click and collect'
offers further scope to drive sales, including made-to-order range
extensions.
-- The recent relaunch of our Greggs App lays the foundations for future
growth as we recruit many more customers to benefit from our loyalty
mechanic and take a CRM approach to offer them reasons to visit more
often. Much of the infrastructure investment to support this is now
in place and we will increase marketing investment in the months and
years ahead to develop visit frequency and average transaction value.
We are focused on significantly increasing our membership base from
the current 400k members.
-- Our supply chain and IT infrastructure have benefitted from investment
in recent years to establish an efficient basis on which to base further
growth. In the coming years we will build on this to expand capacity
for both new shops and growth from new channels, as well as restarting
our shop refurbishment programme. We expect capex requirements to
peak across 2023 and 2024 and that all investments will be self-funded.
Details of expected capital expenditure are set out below.
-- Financial impact - success in driving like-for-like growth in new
channels will leverage our existing asset and cost base more efficiently,
and will allow us to continue to invest in our price competitiveness
as well as even higher standards in terms of the sustainability of
our customer offer. We believe that this, and the investment required
for growth, can be managed whilst delivering strong returns for shareholders.
With a strong net cash position, we are in the process of re-establishing
the ordinary dividend policy and see potential for additional distributions
in the near term and beyond the investment phase of our plans.
ENQUIRIES:
Greggs plc Hudson Sandler
Roger Whiteside, Chief Executive Wendy Baker / Nick Moore
Richard Hutton, Finance Director
Tel: 0191 281 7721 Tel: 020 7796 4133
Additional information
Expected five-year capital expenditure, precise phasing to be
determined by rate of progress against growth plans:
GBPmillion 2021 2022 2023 2024 2025 2026
Retail 37 85 105 105 95 92
----- ----- ----- ----- ----- -----
Supply chain 20 69 85 94 57 27
----- ----- ----- ----- ----- -----
IT & other 8 15 15 15 15 15
----- ----- ----- ----- ----- -----
65 169 205 214 167 134
----- ----- ----- ----- ----- -----
Expected sales bridge resulting from the strategy:
GBPmillion
Approximate 2021 revenue 1,200
-----------
Covid recovery & wholesale 180
-----------
Estate growth 600
-----------
Evening walk-in 110
-----------
Evening delivery 70
-----------
Daytime delivery 100
-----------
Loyalty & CRM 140
-----------
2026 revenue opportunity 2,400
-----------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
TSTEAXELEDKFFFA
(END) Dow Jones Newswires
October 05, 2021 02:00 ET (06:00 GMT)
Greggs (LSE:GRG)
Historical Stock Chart
From Feb 2024 to Mar 2024
Greggs (LSE:GRG)
Historical Stock Chart
From Mar 2023 to Mar 2024