16 hours ago
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The UK’s biggest bakery chain, Greggs, has said last month’s heatwave harmed its sales and profits as customers went off the idea of hot pastries in the unusually high temperatures.
Shares in Greggs slumped almost 13% as investors reacted to the profit warning a day after the UK experienced the hottest day of the year so far, with temperatures reaching as high as 35C.
The group said that sales at the 2,085 shops it operates directly grew 2.6% in the six months to 28 June. However, “good progress in May [was] followed by slower growth … as high temperatures impacted consumer spending purchasing patterns”.
Greggs said: “Sales in June were impacted as very high temperatures affected the UK, increasing demand for cold drinks but reducing our overall footfall.”
The bakery chain said that total sales in the first half were up 6.9% year on year to £1bn, as it targets opening 140 to 150 new stores this year.
However, Greggs said that the impact of the heatwave to date meant it now expected full-year operating profits to be “modestly below” the level achieved last year.
“Sausage rolls may not be the first thing consumers yearn for when temperatures get into the 30s, and that’s been the case for Greggs,” said Derren Nathan, the head of equity research at Hargreaves Lansdown.
“While cold drink sales were up in June, when customers flake in the heat, flaky bakes aren’t first choice on the menu and footfall declined for the month. That’s taken the sheen off like-for-like sales, which were up a respectable 2.6% in the first half.”
In May, Greggs reported a pickup in sales after its successful expansion into iced drinks, pizza boxes and a macaroni cheese that went viral on social media.
The bakery, which is headquartered in Newcastle upon Tyne, said at the time that sales growth was also being boosted by the sunny weather.
However, since then the UK has notched up the second warmest June on record – the warmest ever in England – while the Met Office confirmed that 34.7C was recorded at St James’s Park in central London on Tuesday afternoon.
The chain’s share price is down more than 38% so far this year amid broader concerns around slowing sales growth.
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This year Greggs increased the price of its sausage rolls by 5p to £1.30, blaming wage, tax and food cost rises. It formed part of an average 4% price rise on key items including coffee and doughnuts.
The company said it had no choice but to pass on the rising cost of its wage bill to consumers after two-thirds of its workers received a 6.1% pay rise in January
Greggs manages 2,085 shops, while 564 are franchised.
The company said that in the first half of this year it opened 87 new shops, while closing 56, and “remained confident” of achieving 140 to 150 net new openings this year.
