Greggs soggy numbers masks strategy shift

Britain's answer to McDonald's, sausage roll specialist Greggs, had a slightly bumpy morning on Tuesday, with its share price more flaky than the baker's pastry after a disappointing trading update, but there's more to the results than meets the eye.

Greggs is determined not to be constrained by its traditional high street offering. This was why it expanded, unsuccessfully, into Europe (Belgium bizarrely) and why it is now trying new caf style formats and a move into frozen food.

In April the company began selling a range of nine products through Iceland stores, in the "bake at home" market. This was a new departure but the Greggs management are clearly pleased with the results, saying: "Sales have performed very strongly and are already making a contribution to profits."

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Greggs is also developing a range of different store formats. It has four "Greggs Moment" coffee shops and has also begun a "Greggs the Bakery" concept with a store opening in Newcastle. The idea here is to give a more "traditional" bakery experience, including artisan breads and made to order sandwiches.

Total new store openings for the last six months were 39, with a net figure of 33 after closures. The total estate is now over 1600 outlets.

What can't be denied is that Brits love Greggs' offering and the difficult last quarter may help the firm next year as the comparison will look beatable. And, knowing the British diet, it's very difficult to bet against sausage rolls and doughnuts.

BS