Greggs predicts profits to bounce back to pre-pandemic levels

Greggs has raised its profit guidance for this year, indicating it could hit pre-pandemic levels after reporting a strong rebound in sales since the public returned to the high street after the easing of coronavirus restrictions last month.

The Newcastle-based baker, known for its sausage rolls, steak bakes and vegan snacks, said that sales growth since non-essential retail stores were allowed to open from 12 April has outstripped the same period in 2019.

The recovery prompted the company to significantly upgrade its profit forecast for the year, saying there is a possibility it could match the record £114m reported in 2019, the year it launched its hugely popular vegan sausage rolls.

“Considerable uncertainty remains but profits for the year could be around 2019 levels, materially higher than the board’s previous expectations,” said the company, which last year reported its first loss since 1984 as pandemic lockdowns forced prolonged store closures.

Shares jumped 16%, making Greggs the top FTSE 250 riser on Monday morning.

The company said sales have consistently improved this year. In the 18 weeks to the end of May sales fell 13.5% to £352m, compared with £373m in 2019. In the eight-week period to 8 May they were down only 3.9% on two years ago.

“In recent weeks, following the easing of restrictions across the UK, we have seen a strong recovery in sales levels,” the company said. “If restrictions continue to ease in line with current plans then we now expect our overall sales performance for the year to be stronger than we previously anticipated. Our two-year like-for-like growth since 12 April has been positive.”

However, the company, which opened 34 new shops and closed 11 in its 18-week trading period, said that the further relaxing of pandemic restrictions, which will allow cafes and restaurants to reopen for indoor service, will provide more competition for its take-out offer.

“Nonetheless, we are pleased with the progress that we have made so far this year in both the walk-in and delivery channels,” the company said. Greggs said it has also rolled out delivery services to 800 of its more than 2,100 retail outlets across the UK.

In March, Greggs said it intended to open a further 100 shops and new home delivery services this year. The company said on Monday that its focus for expansion was locations where “performance has proved to be most robust”, such as retail parks, roadside and petrol stations.

“Greggs is betting on a big recovery in pre-pandemic activity once considered normal, namely going to work in an office, meeting friends and family for social activities, and more movement via personal and public transport,” said Russ Mould, the investment director at AJ Bell.

“Many people think we’re going to see structural change in where work is done. However, we are still creatures of habit and it wouldn’t be surprising to see queues return to Greggs stores … as more government restrictions are lifted and companies lay down their long-term working strategies.”