Greggs (GRG.L) reported its first ever loss since it went public 36 years ago but is still planning to open 100 more stores in 2021.
The group said in its preliminary results for the 53 weeks ending 2 January this year, that it made a loss of £13.7m ($19m) before tax in 2020, down from profit of £108.3m in 2019. Total sales fell 30.5% to £811.3m and like-for-like sales in company-managed shops declined by 36.2%.
“Financially, 2020 was a year of two very different halves,” the company explained. It said the period to June included an extensive lockdown period, where shops were closed and it relied on financial support from a number of government-backed schemes.
In the second half of the year it took action to reduce this reliance and saw a “progressive strengthening of business performance, albeit materially impacted by COVID-19 restrictions, supported by the development of new digital channels.”
Shares were up roughly 5% on Tuesday morning:
"Greggs is more resilient than many of its food-on-the-go competitors. The Group has deeper pockets than most of its peers and with only 1 in 8 stores in city centres, Greggs hasn’t been burnt by lockdown in the same way as businesses like Pret a Manger have," said Ross Hindle, analyst at Third Bridge.
"But Greggs does face a more existential crisis. The big question is how compatible Greggs will be with the UK’s post-lockdown preferences for frugality and healthier eating," he added.
The company identified digital technology as the key opportunity to increase market share by increasing customer loyalty, menu choice, and multi-channel reach.
It believes new opportunities exist in locations such as central London and mass transport hubs where availability and rental levels may make them more accessible.
“With a strong pipeline and support from multi-channel development we have raised our target for the UK estate to 3,000 shops,” the company said.
In 2020 it opened 84 new shops, including 35 franchised units, and closed 56, growing the estate to 2,078 shops as at 2 January 2021, 328 of which are franchised shops.
Watch: Greggs warns of tough times for 'foreseeable future' as it plans cuts
"Greggs has made a better-than-expected start to 2021 given the extent of lockdown conditions and is well placed to participate in the recovery from the pandemic. It has a clear strategy to extend its digital capabilities and to grow further in new locations, channels and dayparts. These opportunities will benefit all of its stakeholders in the years to come," said CEO Roger Whiteside.
"In a year like no other I believe that the Covid crisis has in many ways demonstrated the strength of Greggs. It has shown the resilience of our business model," he added.
In November last year, Greggs was set to slash 820 jobs as the coronavirus pandemic and lockdowns continue to devastate UK high streets.
The boss of the bakery chain warned that Greggs “will not be profitable as a business” if sales continue at the rates they have been in lockdown.
Watch: What UK government COVID-19 support is available?