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Greggs Q3 results show continuing recovery & increasing potential for growth

Greggs, the food-on-the-go retailer with over 2,100 retail outlets throughout the country, has published its Q3 trading update.

Q3 highlights
• Two-year LFL* for third quarter up 3.5% despite staffing and supply chain disruption
• Delivery sales developing well, 943 shops now involved
• 68 net new shops opened year-to-date (84 openings less 16 closures)
• Continue to expect around 100 net shop openings in 2021
• Broadening of vegan-friendly food and drink options well received
• Inflationary pressures rising towards end of 2021
• Expect full year outcome to be ahead of our previous expectations
* Like-for-like (LFL) company-managed shop sales performance against comparable period in 2019

Strategic development
• Strategic direction remains consistent - further growth in the shop estate supplemented by development of new channels in the food-on-the-go market
• Ambitious target to double turnover over next five years to circa £2.4bn in 2026
• Planning to accelerate rate of net shop number growth to c.150 per year from 2022 with potential for at least 3,000 shops
•Looking to develop multichannel sales by:
– extending evening trading to more shops
– building on initial successes in the online / delivery channel
– roll-out of the new Greggs app to more customers
• Investment programme will equip shops for a multichannel future and create additional supply chain capacity for growth
• Further improvement in sustainability of customer offer as it delivers on the Greggs Pledge

Trading performance
Despite widely reported disruption to staffing and supply chains, it is a credit to our teams that Greggs has continued to trade well over the third quarter with two-year like-for-like sales in company-managed shops rising by 3.5% when compared with the same period in 2019.

Growth was particularly strong in August when a ‘staycation’ effect was evident and remained in positive territory in September, with two-year like-for-like growth of 3% in the four weeks to 2 October. Delivery sales have continued to develop well, with 943 shops now involved in supplying customers through this channel.

The broadening of our vegan-friendly food and drink options has been well received, notably the limited edition 'Vegan Sausage, Bean & Cheeze Melt' along with a ‘Vegan Ham & Cheeze Baguette’ and a vegan-friendly breakfast sausage.

Pizza and savoury boxes are supporting the delivery channel and our autumn menu is now available in shops, featuring favourites such as pumpkin spiced latte and spooky bats and buns for Halloween.

Shop estate & supply chain development
In the year to date, Greggs has opened 84 new shops and closed 16 shops, giving a total of 2,146 shops trading at 2 October 2021 (comprising 1,785 company-managed shops and 361 franchised units).

Openings in the third quarter have included three drive-thru locations and our first shop in London’s Canary Wharf. For the year as a whole, the group continues to expect around 100 net openings, of which half are planned to be with franchise partners.

The new automated cold storage facility in Newcastle upon Tyne has commenced operations and is performing well. This will create additional capacity to support our growth ambitions whilst also reducing logistics costs and carbon emissions.

Outlook
Greggs has not been immune to the well-publicised pressures on staffing and supply chains and we have seen some disruption to the availability of labour and supply of ingredients and products in recent months.

Food input inflation pressures are also increasing; whilst we have short-term protection as a result of our forward buying positions we expect costs to increase towards the end of 2021 and into 2022.

Operational cost control has been good and the strong sales performance in the third quarter gives us confidence as we move into the autumn. Subject to any unexpected COVID disruption we expect the full year outcome to be ahead of our previous expectations.