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Greggs Plc
The company just released its trading update for the first 19 weeks of 2023.
Highlights:
- Total sales of 609M GBP.
- 17.1% like-for-like sales growth. Even by ignoring new store additions, a growth at these levels put the company on track to achieve the doubling of revenue by 2026. Nonetheless, FY22 was negatively impacted by Omicron variant in the first nine weeks of 2022 (for the remaining weeks, growth stood at 15.7%).
- Net stores added - 37. This is on track for the 150 net new stores per annum.
- Hot food & snacks showed strength.
- Investments in their distribution centers in Birmingham and Amesbury are under way to support future expansion plans.*
"Although we expect to see ongoing material cost inflation, we have good forward cover
on key commodities. Consumer disposable incomes are likely to stay under pressure,
but we remain confident that our outstanding value proposition continues to be
compelling.
Whilst uncertainties continue, the Board’s expectations for the full year outcome are
unchanged."
*For 2022 earnings call: "One is a relatively modern one at Amesbury in Wiltshire, where we have a piece of land on the site that's ready to add circa 200 shops capacity. And the other one is our Birmingham distribution center, which is an older building that's been refurbished to increase its throughput. And we think that will add 50 to 100 shops capacity there as well. So that's taking another 300 shops worth of capacity over those two relatively modest investments over the next 2 years." Richard Hutton, Chief Financial Officer
With regard to their cautious outlook and consumer spending under pressure—it sounds like Greggs faces that classic $MCD predicament of promoting a sense of value while maintaining healthy margins. One way McDonald's has dealt with this is through couponing and their loyalty program, allowing them to raise prices but giving the most loyal customers a break and a reinforced sense of value. Does Greggs do any discounting or have a loyalty program?
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