UK's Greggs targets more evening trade after return to profit

By James Davey

LONDON (Reuters) -British fast food chain Greggs raised its full year outlook after a return to first-half profit and said it would use its rapidly expanding delivery service to grow sales in the evening, a segment of the market where it is currently underrepresented.

Greggs, which trades from 2,115 shops and is best known for its sausage rolls, steak bakes, vegan snacks and sweet treats, made an underlying pretax profit of 55.5 million pounds ($77.1 million) in the six months to July 3 versus a pretax loss of 64.5 million pounds in the same period last year.

While Greggs' shops were allowed to stay open during COVID-19 lockdowns, the crisis disrupted its business model, which relies on a high volume of customer visits.

However, the group saw a strong recovery in sales as pandemic restrictions eased.

Total first half sales were 546.2 million pounds, up from 300.6 million pounds in 2020.

Like-for-like sales compared to the same period in 2019, before the pandemic impacted trading, were down 9.2%.

But they have been positive since non-essential retail stores re-opened, driving increased customer numbers and are up 0.4% in the most recent four weeks to July 31.

Shares in Greggs were up 0.4% at 0758 GMT, extending 2021 gains to 56.5%.

Greggs' home delivery service in partnership with Just Eat has been rolled out to 837 outlets, with sales from the service representing 8.5% of company-managed shop sales in the first half.

CEO Roger Whiteside said he expected delivery would keep growing as more people view it as the most convenient channel.

"We're going to use the delivery channel as our primary way into trading in the evening," he told Reuters.

"Combining delivery with walk-in customers makes addressing that part of the day much more viable for us more quickly."

Whiteside said expanding delivery means more shop capacity will be needed.

Greggs sees scope for at least 3,000 UK shops. It expects around 100 net openings in 2021, creating 500 new jobs in the second half.

The group now expects full-year profit "slightly ahead" of its previous expectations. Prior to Tuesday's update analysts' average forecast was profit of 130 million pounds versus a 13.7 million pound loss in 2020.

The group is also paying an interim dividend of 15 pence, its first payment since 2019.

($1 = 0.7196 pounds)

(Reporting by James Davey, Editing by Paul Sandle and Emelia Sithole-Matarise)