Reuters: Hot Stocks: UPDATE 1-Greggs warns on profit as sales melt in heatwave

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UPDATE 1-Greggs warns on profit as sales melt in heatwave Aug 6th 2013, 09:48 Tue Aug 6, 2013 5:48am EDT * Sees full-year profit 3 mln stg lower than expected * Underlying sales down 3.2 pct in five weeks to Aug. 3 * H1 profit down 29 pct to 11.4 mln stg * Shares fall as much as 9 pct to 6 week low By Max De Haldevang LONDON, Aug 6 (Reuters) - Greggs, Britain's biggest seller of food on the go, has cut profit expectations for the second time in four months, blaming July's heatwave for a drop in sales of its hot savouries, sausage rolls and sandwiches. Shares in the company fell as much as 9 percent to a 6-week low in Tuesday morning trading. Greggs, which has around 1,690 stores, said sales at outlets open over a year dropped 3.2 percent in the five weeks to Aug. 3, reversing an improving trend seen in the second quarter. As a result of the weather and one-off costs, full-year profits would be around 3 million pounds ($4.6 million) lower than expected, it said. "Greggs is a business that is very sensitive to extreme weather, whether that's extreme in the sense of snow or extreme in this case in the sense of a heatwave," said Chief Executive Roger Whiteside, who joined from Punch Taverns in February. Gregg's recent performance sharply contrasts with sellers of barbecue food and drink, who helped retailers enjoy the best July since 2006 when the country also basked in sunshine, industry data showed earlier on Tuesday. Pretax profit fell 29 percent to 11.4 million pounds ($17.5 million) for the first half of 2013 on sales up 3.4 percent to 362 million pounds. Like-for-like sales fell 2.9 percent. Whiteside said he would aim to improve the group's performance in part by combining its two new shop formats - "Local bakery" and "Food on the go" - into a single "Bakery Food on the Go," and ending the group's trial in coffee shops. Products, such as steak bakes and sausage and bean melts, had been revamped, the company said, and a bigger range would be available throughout the day. The changes had already delivered a boost in pizza and cake sales. "Pizza was something that is under served in the food on the go market," Whiteside said. "So we developed a much better product than a pizza which had originally been in the range and that's driving phenomenal growth in our stores right now." Greggs, which has grown out of a traditional bakery business to target Britain's 6 billion pounds a year food on the go market, said it would step up store refurbishments to 130-150 in the second half from 90 in the first, and invest 25 million pounds in its supply chain over the next five years. But Canaccord Genuity's Wayne Brown was not convinced the strategy would pay off. "We expect some of this investment is to support the complexities of a food on the go concept as opposed to a traditional baker but we question the depth and breadth of management skill set to manage a very different retail operation," he said. Analysts had expected Greggs to make an underlying pretax profit of 45.4 million pounds for the full year, down from 51.9 million in 2012, according to a Thomson Reuters I/B/E/S poll of nine brokers. The interim dividend was flat at 6.0 pence per share. At 0930 GMT, the shares were down 7.3 percent at 409.3 pence. Link this Share this Digg this Email Reprints

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