Greggs, the UK food-to-go chain, has said that roughly half of its shop staff will need to accept reduced hours or face job cuts while trade remains depressed as a result of the coronavirus pandemic.
Roger Whiteside, Greggs’ chief executive, said on Tuesday that approximately 50 per cent of the food retailers’ stores had higher contracted hours than the company expected to need once the government’s furlough scheme ends next month.
“It doesn’t make any sense to keep people on furlough open ended . . . You have to resize your business until such time that this crisis finds an end or a vaccine,” he said.
Greggs, which employs 22,000 shop staff, said it considered 14 hours to be the minimum amount of labour required to make a job viable.
Shares in Greggs were down 7 per cent by midday on the news.
Despite the consultation over jobs, Greggs said it had been encouraged by recent trading, which had returned to 76.1 per cent of 2019’s levels this month. Sales across Greggs’ stores averaged 71.2 per cent of the previous year’s level in the three months to the end of September, the chain said.
Although Greggs was technically overdrawn between May and August, it said that it had returned to a net cash positive position in September thanks to the pickup in trade.
As a result, it plans to open net 20 stores by the end of 2020 despite having closed 49 so far this year.
In a presentation to investors in February, Mr Whiteside had said the company aimed to have 2,150 shops by the end of 2020. As a result of the pandemic, it will now end the year with closer to 2,050 but analysts at Jefferies said that the resumption of store openings was “a helpful restart to the rollout programme that represents one of Greggs’ core growth levers”.
Mr Whiteside said that Greggs would focus on opening stores in retail parks and roadside locations as it was the “car borne shopper that is most active out of the home”.
Due to the closure of its seating areas, the company was unable to benefit from the government’s discount “eat out to help out” scheme and said that sales of its products, which include its popular sausage rolls and hot pastries, had been slower in August as a result of the summer heat.
Greggs also highlighted the uncertain outlook and warned that rising Covid-19 infections could continue to disrupt its supply chain after outbreaks at its manufacturing centre in Newcastle and distribution facility in Leeds caused them to temporarily close.
Greg Johnson, an analyst at Shore Capital, said that Greggs had “composed an upbeat narrative” for “what appears to be still a very challenged and uncertain trading environment”.
He noted that achieving 76.1 per cent of normal trading levels represented “a fall of 23.9 per cent, which is enormous and challenging from a negative operational gearing perspective”.