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Consumer spending downturn hits Greggs.

Byline: Peter Cripps

BAKERY chain Greggs has revealed a slowdown in sales growth after the squeeze in consumer spending dulled the nation's appetite for its pies and rolls.

The chain, which operates more than 1,500 outlets and has expanded its range by selling breakfast baps and coffee, said like-for-like sales rose 0.4% in the 26 weeks to July 2 - compared to 0.8% in the first 18 weeks of the period.

And it warned that it does not expect the second half of 2011 to bring any relief, as consumer spending will continue to come under pressure.

It only expects like-for-like sales to grow marginally in the year as a whole.

But its expansion plans are on track - Greggs opened a record 39 stores during the period, leaving it on track to open 80 in the year, as it takes up cheap rents on Britain's beleaguered high streets.

And it plans to make more efficiency savings to help it offset the continuing "very substantial" rise in commodity prices, which are driving up its costs, including its ingredients and energy bills.

Greggs said underlying profits rose 4% to pounds 19.3m, not including a pounds 2m impact of the additional cost of bank holidays around Easter and the Royal Wedding, which made May a "very difficult month".

Chief executive Ken McMeikan said commodity prices had risen faster than it had expected in the first half of 2011, after flour, meat and energy costs rose by up to 30%, and dairy products were up by as much as 10%.

He said that energy costs are expected to get "worse" in the second half, although flour costs should start to come down.

Its meal deal of a breakfast roll and a coffee rose from pounds 1.99 to pounds 2.09 after it was taken off an introductory price, but most prices had only risen by pennies.

The Newcastle-based firm has seen its sales boosted by an expansion of its range of breakfast products.

It has sold 6.4m breakfast rolls this year while coffee, porridge and croissants have also proved popular. Greggs is looking at expanding into the take-home market by making products that consumers can bake at home and is trialling selling sausage rolls in 10 stores run by frozen food retailer Iceland.

Revenues were up 4.2% to pounds 335m, while pre-tax profits rose 33% to pounds 24.7m. Shares in Greggs fell as investors balked at warnings that the second half will continue to be tough.


Greggs - under pressure from soaring commodity prices
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Title Annotation:Business
Publication:Daily Post (Liverpool, England)
Date:Aug 10, 2011
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