Recently, things have been looking up for the high street, with consumer confidence on the up and higher footfall rates being recorded in Britain’s town centres than has been the case for several years. However, a profits warning posted by one of the high street’s most popular names could serve to put an end to this period of growth.
Greggs Bakery has blamed poor weather and the economic pressure faced by consumers for a 4.4 per cent drop in like for like sales and the corresponding plunge in profits. It now believes that it will fail to meet its annual targets, stating that it did not expect market conditions to change in the short term.
In a statement to the press, Greggs said; “Despite good cost control, overall profits have been affected in the first quarter of the year and are behind our plan.
“Although we are only four months in to the year, based on current own shop like for like performance we believe that profits for the year are likely to be slightly below the lower end of the range of market expectations.”
The cold snap at the beginning of the year certainly caused problems for high street retailers, with Greggs by no means the first to blame the weather for a mediocre performance.
However, while most retailers can now rely upon internet sales to make up for any shortfall in their commercial property based side of business, Greggs does not have this option, leaving it in a slightly more precarious position than many of its high street compatriots.
At present, Greggs operates almost 1,700 branches on high streets across the UK, making it one of the most significant presences in many town centres. Despite the drop in sales, it has fought back with a net addition of ten stores – a wise move, as it helped to increase total sales by 3 per cent.
Chief executive Roger Whiteside says; “Our new shop openings remain focused on locations that have been less impacted by lower footfall such as workplaces, travel and leisure destinations.
“The trend of the last few weeks shows that there are fewer customers shopping, so we are trying to make stores more attractive and provide more space for customers in our stores so they can stay inside and out of the bad weather.”
While Greggs remains popular with workers on the lunchtime run, a lower disposable income among consumers has meant that promotional offers have become substantially more attractive than a full priced sandwich or sausage roll. This has eaten into the profit margin considerably – perhaps explaining this week’s shock announcement.
Perhaps as the weather gradually improves and high streets come alive for summer, Greggs will be able to post a profits boost once again. However, it is unlikely that even a bumper summer will offset the first quarter’s disappointing results.
