Greggs has asked its banks for extra financing as the UK bakery chain prepares for the risk that a rise in Covid-19 infections later this year leads to another lockdown.
A jump in cases in Spain, France and Germany, just as some Britons embark on their summer holidays, has raised fears of a possible resurgence of the virus in the autumn. The government this week told travellers returning from Spain that they would have to isolate for two weeks.
Greggs, one of the most successful UK retailers of recent years, revealed on Tuesday that it had slumped to a pre-tax loss of £65.2m in the first half of the year after closing its more than 2,000 stores for much of the spring.
The Newcastle-based group said trading was now at 72 per cent of 2019 levels, but warned it will not return to pre-pandemic patterns while customers are required to social distance.
Addressing the extra financing from banks, Richard Hutton, the retailer’s finance director, said the group would not look to borrow more than the £150m that it had taken out under the UK government-backed corporate loan scheme in April.
The additional funding means “we will have much greater liquidity to draw on if something like this should happen again”, Mr Hutton said, referring to another lockdown.
Prime Minister Boris Johnson this week warned that the pandemic could worsen after the summer, but stressed that the government would seek to avoid a second national lockdown.
Greggs said that during a recent lockdown in Leicester, where infection rates had jumped, it kept three of its 10 shops open but that trading had been below average.
The preparations for a potential resurgence in the virus came as Greggs revealed that revenues in the first half of the year tumbled 45 per cent to £300m. The loss it reported compared with a pre-tax profit of £36.7m in the first half of 2019.
Clive Black, an analyst at Shore Capital, said it “may be as late as 2024” before the chain, which until the pandemic struck had upgraded its profit forecasts five times in quick succession, returned to pre-coronavirus levels of profitability.
Greggs closed 45 shops in the first half, opened 20 and said that it had taken £69m support from the government’s job retention scheme.
Roger Whiteside, chief executive, said he expected to take another £20m to £25m in support from the furlough scheme until October, when it is due to end. He would not rule out job cuts later in the year.
“We employ people to serve customers,” he said. “If you have no customers to serve there’s no job for them to do.”
Greggs has been less affected than rivals such as Pret A Manger by a lack of commuting into major office hubs. But Mr Black warned that although only 15 per cent of the group’s stores estate were in those areas, they would normally have been busier than suburban stores.
Mr Whiteside said that as a result of the virus Greggs would focus its plans for new sites on drive-through locations, now “the most heavily competed property market in the food-on-the-go sector”.
The company has also been trialling concessions in Asda supermarkets, which it said it would increase, and plans to have delivery services available from 250 of its sites by the end of the autumn.