Greggs has reported lower annual profits amid rising costs, but the high street chain said 2018 would be the “peak year” for internal investments meant to help transform the business.
The baked goods retailer said pre-tax profits fell from £75.1 million in 2016 to £71.9 million last year, despite reporting a 7.4% rise in total sales to £960 million over the 12 months to December 30.
Its earnings were knocked by an exceptional charge of £9.9 million linked to a major investment programme meant to reshape its internal supply chain.
2018 will be the peak year for investment in our supply chain as we create the platforms for further growth.Greggs chief executive Roger Whiteside
That is compared with a £5.2 million charge in 2016, when it launched the first phase of the turnaround plan.
Chief executive Roger Whiteside said it was a strong performance for Greggs given the “challenging economic circumstances” which saw rising inflation having an impact on both the company costs and customer disposable income.
“At the same time we continued to make good progress with our business transformation programme.
“Whilst the UK consumer outlook remains challenging, we are encouraged by the start to the year. 2018 will be the peak year for investment in our supply chain as we create the platforms for further growth.
“We also plan to open a record number of new shops as we implement our plan to grow Greggs as a leading food-on-the go brand.”
The retailer said it opened 131 new shops over 2017 against 41 closures, meaning it added 90 locations on a net basis, bring the total number of trading stores to 1,854 as of December 30.
As part of its transformation programme, Greggs said it also relocated its Yum Yum manufacturing to its Glasgow site – which was expanded in order to consolidate its Scotland distribution facilities after the closure of the Edinburgh bakery in May.
Overall, it cheered further improvements to its product range, having focused on hot drinks and hot food, as well as it growing range of healthier options as part of its “Balanced Choice” range which accounted for more than £100 million of sales.
Like-for-like sales at the company’s own managed shops – which excludes franchises – rose 3.7% over the year.
Greggs said it was already “encouraged” by the start of the 2018 financial year, with company-managed shops recording a 3.2% rise in like-for-like sales over the eight weeks to February 24.