Greggs revealed today that it is entering a period where a lower number of shop refurbishments are due, but said it would return to the “more recent run-rate” of 200-plus shop refits a year from 2020.
Boss Roger Whiteside said the slowdown was in line with its “normal” shop refurbishment cycle and reflected the level of progress in the transformation of its shop estate over the past few years. Hundreds of stores have already been converted to its food-on-the-go format.
Greggs upgraded 107 shops in the first half of 2017 and plans a further 30 or so conversion projects before the end of the year. Around 130 refurbs are scheduled for each of the next two years before higher levels of project activity resume.
“We have made a good start to the second half of the year and are confident that the strategic investments we are making will enable the business to continue delivering further profitable growth,” explained Mr Whiteside. “In the short term we remain alert to pressures building on consumers’ disposable income and the continuing economic uncertainty.”
The extensive refurb project comes at the same time as Greggs continues to expand the size of its estate.
It opened 61 new shops in the first half of 2017 (including 24 franchised units) and closed 19 shops, giving a total of 1,806 shops (of which 181 are franchise units) trading at 1 July 2017. It also opened its first ‘Drive-Thru’ shop at Irlam, Greater Manchester, in June.
“We have been encouraged by its popularity, indicating a demand for further Drive-Thru locations,” said Mr Whiteside. “We also continued to expand the estate in the south-west of England and in Northern Ireland while adapting our formats to suit locations such as garage forecourts. Our pipeline of new shop opportunities remains strong and we continue to expect around 100 net openings in the year as a whole.”
The growth in new shops nudged half-year sales up 7% to £453m. Like-for-like sales grew 3.4%. Pre-tax profits, including property profits and exceptional charges, reached £19.4m, down from £25.4m last year.
Mr Whiteside said the popularity of its hot sandwiches continues to increase, demand for coffee and breakfast remains strong and it is seeing good growth in traditional products, such as fresh-baked savouries.
Capital expenditure during the first half rose to £36m, which was down to new shop growth and estate refurbishment, as well as investment in the supply chain. Its Edinburgh bakery was closed in May, with production and logistics activities transferred to Glasgow. The company is consolidating manufacturing platforms at the plant, starting with the production of Yum-Yums.
Greggs has also just deployed a new central forecasting and replenishment system to all its shops ahead of plan, with Whiteside describing the installation as the “most significant process change” that the business has ever embarked upon. It is already delivering benefits in terms of product availability and administration, he said.