Greggs PLC (LON:GRG) is closing all its bakery stores from Tuesday onwards and has decided to cancel its final dividend for 2019 as the coronavirus pandemic bites on the high street
In a statement released late afternoon Monday, Greggs said it intends to maintain employment of its staff at full contract hours for as long as is practicable during the temporary closure, with support from the UK government's Coronavirus Job Retention Scheme.
READ: Greggs holds onto full-year expectations despite February storms
The retailer said: "We, like other consumer-facing businesses, have seen a sharp reduction in footfall in many of the areas where we trade over the last week. Initially, the impact was seen in transport hubs and in central London, and has since affected other towns and city centres across the UK.”
"The rate of decline has been increasing each day as more and more customers heed the government advice on social distancing, and we would expect this to increase further if we were to continue to trade," it added.
Greggs’ like-for-like sales in the nine weeks to February 29 were up 7.5% year-on-year, however, in the two weeks succeeding that like-for-like sales were only 4.1% higher and then fell by 9.9% in the most recent week to March 21, the group said.
In order to conserve cash, Greggs said it has decided to cancel its 2019 final dividend, which is expected to save the group £40mln.
It also expects to save a further £45mln by only completing existing shop projects, deferring new shop openings and planned refurbishments.
It also intends to delay building work, except for its major automated cold store project which is strategically important and will continue.
The baker said it expects to end the week with £60mln in cash.
Greggs said: "There are many forward scenarios but we are planning our finances around the most severe, being that our shop operations remain closed for a prolonged period."
The company added that providing forward guidance is "impossible", but, in the current environment, it no longer expects to make year-on-year profit growth.
"Whilst the outlook during this crisis remains uncertain Greggs is a resilient business with strong growth credentials and we should be confident of its ability to navigate this event and return to growth when the economy recovers," the baker concluded.
In a note on Tuesday commenting on the closure, analysts at Shore Capital placed their 'hold' rating for Greggs under review, saying the company will "clearly experience a loss of trade, gross profit and with ongoing fixed costs, cash outflows".
However, they added that the firm was "blessed by a strong cash balance" and that the cost preservation measures "should limit cash burn and sustain the viability of the business; as should discussions with the [Bank of England] and its lenders".
"In light of these developments, we withdraw our own financial forecasts, underscoring the lack of visibility. However, to us, Greggs is a viable entity that should continue to positively evolve and build its relevance again", the broker concluded.
Greggs shares were 3.5% higher at 1,344.8p in early trading on Tuesday.
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