Food & Beverage updates
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Profits at bakery chain Greggs and Domino’s Pizza have surged above pre-pandemic levels, boosted by tax cuts, the Euros football tournament and consumers’ unabated appetite for fast food delivered at home.
The strength of the performance led both chains to increase shareholder returns with Domino’s set to expand its share buyback programme by £35m and Greggs declaring a dividend for the first time since October 2019.
The Newcastle-based baker also said on Tuesday it expected profits for the full year to be “slightly ahead” of previous forecasts.
Fast-food groups have outperformed the rest of the food service sector with consumers ordering comfort food for home delivery while restaurants have been closed during lockdowns.
They have also been less affected by staffing shortages that have hit dine-in restaurants due to the government’s self-isolation rules.
Greggs, known for its sausage rolls and growing range of vegan bakes, said that pre-tax profits in the six months to July 3 were £55.5m compared with a £65.2m loss in the same period last year and a profit of £36.7m in the first half of 2019.
Domino’s, the London-listed UK franchise of the US pizza delivery group, said its profits rose to £60.8m, up by more than a quarter compared with the first half of 2020 and an increase of 44 per cent on the same period in 2019.
Sales were up 19.6 per cent on the previous year to £752.3m, which Domino’s attributed to a marketing campaign targeting post-lockdown socialising and VAT cuts. The company also said it had benefited from demand during the Euros: the England vs Scotland match in June was its busiest trading day so far this year.
Domino’s disposal of its lossmaking international businesses in Norway, Sweden and Iceland over the past year helped to improve profits, although chief executive Dominic Paul warned that “the external landscape remains uncertain” and the reopening of restaurants without any trading restrictions from July 19 could hit sales.
Greggs noted that although customers were spending more per transaction and ordering more food for delivery, its profit line had been lifted by cost-saving measures during lockdowns when footfall on high streets fell to record lows. Sales were flat in the first half of the year compared with 2019.
The bakery chain plans to resume new store openings, targeting 100 net new outlets this year, and aims to employ a further 500 staff in the second half of the year.
Analysts at Barclay’s noted that although Greggs’ delivery trade had slowed in the second quarter compared with the lockdown period in the first quarter, it still accounted for 8.5 per cent of sales in company managed stores. “This is evidence that delivery is here to stay rather than a lockdown phenomenon,” they said.