Greene King this morning set out plans to address the challenges of the ‘value food’ sector after admitting its performance in this area was behind a decline in like-for-like sales for the 18 weeks to 3 September.
Overall like-for-like sales during the last four-and-a-half months rose 1.2% in a market that Greene King says declined 0.7% based on CGA Trading Index figures.
But excluding Fayre & Square, which is being rebranded during this financial year, LFL sales fell by 0.9%.
In the first 10 weeks, LFL sales were in line with the chain’s expectations and broadly in line with last year, despite the tough comparisons from Euro 2016. However, since the second half of July, when the weather worsened, trading weakened, it said.
In a trading update, bosses laid the blame at the feet of its value food business and said it would be ploughing money into upgrades to overcome the decline. It also vowed to offload pubs that no longer fit into its strategy.
“Over the course of the year so far, most of the LFL sales decline can be attributed to value food, although more recently we saw some softening across other segments,” it stated. “We are continuing to address the challenges of the value food sector through measured capital investment to upgrade and reposition pubs and through selective disposals.”
Greene King added that it is strengthening its customer offer with both its net promoter scores and food quality scores continuing to improve this year, while its brand conversion programme is delivering returns in excess of 20%.
“In terms of costs, our programme to deliver £45m of cost savings this year, including further cost synergies from the Spirit acquisition, is on track. The scale of our cost-saving programme helps to reduce the impact of weaker than anticipated sales through limiting margin declines from unprecedented industry cost pressures,” it said.
Greene King said it remains cautious about the trading environment and expects the challenges of weaker consumer confidence, increased costs and increasing competition to persist over the near term.
“In the longer term, utilising the benefits of the Spirit acquisition, our brand conversion and cost saving programmes, our robust balance sheet and our strong cash generation will be important levers to help deliver competitive advantage, growth and attractive and sustainable dividends for our shareholders,” it said.
Greene King operates almost 3,000 pubs in the UK.