Greggs’ trading strength is remarkable in a period when a number of retailers have blamed scorching weather for declining footfall. But Greggs has significant differences from other retailers in terms of its customer cohort and shopping occasion.
Greggs has reported total revenue up 7.3% in Q3, an improved result against 5.2% growth for the first half. Like-for-like sales growth in managed units was up 3.2%, having improved each quarter this year. This despite increasingly strong comparatives which for Q317 were 5.0%.
Over the last five years Greggs has converted its shops to food-on-the-go formats, which increasingly serve working people rather than shoppers. The development of non-traditional locations such as garages and stations, now around 35% of the total estate, also helps to decouple trading from shopping occasions.
Part of the success this summer was that Greggs has improved its offer at times like breakfast and later afternoon which are cooler than the middle of the day. Its breakfast package has been a great success. Menu development meant that its shops were able to provide cold and light food and drink products that customers wanted during the heatwave.
Gross margin came under some pressure during the hot weather because cold drinks and products such as pasta salads are bought-in, and therefore earn lower margins, and also because there was more wastage on traditional products. However, we anticipate that the strong volumes will have supported the contribution to operating profit, leaving the company on course for full-year pre-tax profit consensus of around £81m.