March 4, 2015 / 7:18 AM / in 4 years

Better-off Britons drive record profit at Greggs

LONDON (Reuters) - Britons have stopped scrimping and are treating themselves to pasties, sausage rolls and sticky buns, helping food-on-the-go retailer Greggs (GRG.L) make record profits.

Wages in Britain are recovering after growing by less than inflation for much of the period since the financial crisis whilst shop prices are barely rising.

“Consumers’ disposable incomes are rising and that’s a favourable backdrop for the Greggs business,” Chief Executive Roger Whiteside said on Wednesday after the firm reported a 41 percent rise in 2014 profit and a strong start to 2015.

Shares in the company rose 3.6 percent by 10.35 a.m.

Whiteside said grocery shopping was generally considered as essential spending whereas food-on-the-go is discretionary. Consumers were benefiting from falling prices in a supermarket price war and lower petrol prices.

“There’s just more pounds in peoples’ pockets and they’re more likely to pop into a Greggs and grab food-on-the-go,” said the CEO.

Britain’s food-on-the-go market is worth about 6 billion pounds a year.

Newcastle, northern England, based Greggs made profit before tax and one-off items of 58.3 million pounds in the 53 weeks to Jan. 3, up from 41.3 million pounds in the previous year.

The outcome was consistent with guidance issued in January when Greggs upgraded its profit outlook for the third time in five months.

Total sales grew 5.5 percent to 804 million pounds, while sales at stores open over a year were up 4.5 percent.

Like-for-like sales were up 6.3 percent in the first eight weeks of the new financial year.

Whiteside said Greggs was also benefiting from improved products, such as an overhauled sandwich range and a new coffee blend, better customer service and re-fitted shops.

Greggs hiked its dividend 12.8 percent to 22 pence a share and said it would resume its share buyback programme, with the capacity to return up to 10 million pounds to shareholders.

Shares in Greggs have increased 77 percent over the last year, hitting a record high earlier this month. The stock was up 33 pence at 903.5 pence at 10.35 a.m., valuing the business at about 913 million pounds.

Greggs has 1,650 shops, more than burger chain McDonald’s (MCD.N) has in Britain, and is targeting over 2,000 shops.

Reporting by James Davey; Editing by Elaine Hardcastle

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