Last month when Greggs posted its first pre-tax loss since 1984, when it was first listed on the London Stock Exchange, it probably thought that things couldn’t get any worse.
Because this pre-tax loss of £65.2 million for the six month period to June 27 was as a direct result of the closure of their shops during the covid-19 lockdown that resulted in a like-for-like fall in sales of a massive 49%. This is evidenced by the like-for-like increased level of sales in the same six moth period last year that generated a reported pre-tax profit of £36.7 million. So because the period of enforced closure covered most of Greggs’ second trading quarter, the impact was significant.
So how could things get worse when the period of statutory lockdown has ended and its retail shops are back up and running? There are two reasons.
The first is the impact of covid-19 and the lockdown on consumer behaviour. We have all seen the pictures and read the reports of empty streets and stations around commuter cities and towns. And because this is where many of Greggs’ retail bakery stores are located, there is still uncertainty as to when or indeed whether the level of last year’s sales will return. Only time will tell.
The second is that covid-19 has hit its distribution depot in Leeds with a round 20 of its staff there testing positive for the virus. And whilst other facilities can pick up the slack caused, the result is that Greggs’ shares have fallen by nearly two per cent.
Pre-pandemic, Greggs had aspirational development plans, building on their historical consistency of generating pre-tax profits. How will these be affected? Like all other businesses, there is no historical data on the impact of a national lockdown on which to base risk. So because of this uncertainty the future is unpredictable for everyone, including Greggs.