On a roll: Greggs shares soar as it doubles down on aggressive expansion
Shares in Greggs soared on Wednesday as the bakery chain said it plans to reach at least 3,500 stores in the UK after a jump in profit in the first half of the year.
The sausage roll purveyor reported a 20 per cent boost in pre-tax profit to £76m in the six months to June, surpassing analysts’ £75m forecasts.
The high street bakery’s plans to reach at least 3,000 locations in the UK have raised the eyebrows of many in recent years, as analysts questioned whether the already-ubiquitous chain had more room to grow.
But Greggs doubled down on its expansion plans on Wednesday, telling shareholders that it has identified opportunities to reach an estate of at least 3,500 bakeries in the UK.
Greggs shares soared by more than 10 per cent on early trading, to 1,862p.
Chief executive Roisin Currie said the bakery chain will pursue locations where it is currently “underrepresented,” like retail parks, train stations, airports and roadsides.
“There remains significant headroom for further growth,” she said. In towns and cities, Greggs plans to “optimise the distribution of shops” by relocating existing stores to “respond to local conditions,” she added.
Greggs is still ‘underrepresented’
The bakery said it is aware that new shops in busy areas risk “cannibalising” the sales of nearby locations, but said it is monitoring customer behaviour to minimise this.
While only half of its new openings last year were in areas with no other Greggs within a mile, this proportion rose to 62 per cent for the 65 new shops opened in the first half of this year.
Greggs currently has 2,773 locations across the UK, and one overseas branch in Tenerife Airport, and plans to open more than 100 new bakeries this year.
The bakery chain said its new menu items – including a chicken sausage roll, a tandoori chicken pizza and iced matcha – are boosting sales, which grew 7.2 per cent to £1.1bn in the first half of this year.
Greggs’s growing sales came despite “a challenging market characterised by subdued consumer confidence and increased uncertainty,” Currie said.
Duncan Ferris, an analyst at Freetrade, said that the bakery chain’s 2.1 per cent like-for-like growth figure looks “more pedestrian,” suggesting that the firm’s top line was aided by lower-than-expected inflation, structural savings and new shops.
“But Greggs says performance of new stores was particularly strong, and that the majority of new openings were in locations more than a mile away from other branches. This may alleviate fears the bakery chain’s expansion is merely leavings its own stores competing with each other,” he said.
The FTSE 250 firm said it is leaning into protein-rich and health-conscious food and drink in a bid to appeal to younger consumers.
“These launches reflect our focus on relevance and innovation, while staying true to the familiar quality that customers expect from Greggs,” Currie said.
The group is also expanding its smaller store offerings, including its four “bitesized Greggs” shops and self-service coffee and sandwich machines.