Bakery chain Greggs has hinted at possible job cuts as the government’s furlough scheme ends.
The company, which employs 25,000 workers, expects business activity to “remain below normal for the foreseeable future”.
It said it had reviewed staff costs and was currently consulting with unions and employee representatives.
Greggs said it wanted to reduce the risk of job cuts by putting people on reduced hours.
However, it is not clear if the company will use the government’s new Job Support Scheme where employers and the state top up workers’ pay who are on fewer hours.
The scheme will replace the existing furlough programme which is coming to an end on 31 October. The vast majority of Gregg’s 25,000 workforce had been placed on furlough during lockdown and a quarter remained on the scheme when the company announced its interim results in July.
In a trading statement, Greggs said: “With the Job Retention Scheme planned to end in October we are taking steps to ensure that our employment costs reflect the estimated level of demand from November onwards.”
The company said that since reopening all its shops in July, like-for-like sales in the three months to 26 September have averaged 71.2% of the levels recorded in the same period last year.
Greggs said sales in September were above that average, with a recovery in customer visits.
However, it said August was a difficult month because of high temperatures and it was unable to take part in the government’s Eat Out to Help Out scheme because its shops with seating were closed.
In addition, average sales remain below the 80% level which Greggs said in July was needed for the company to break even.
Nevertheless, Greggs is moving ahead with opening a net 20 new shops this year, which it said will be “predominantly in locations accessed by car”.
The company said it had increased its digital investment during lockdown and “click & collect” – which allows customers pre-order and pay online before picking up food at a shop – has now been rolled out at all its stores.
It has also launched food deliveries with delivery app Just East and said it is “seeing encouraging participation levels”.
The company has more than 2,000 outlets in the UK across city centres, high streets and travel locations such as train stations and airports.
The coronavirus pandemic has meant that the number of people using public transport or flying has drastically fallen, while a change in government guidance on workers returning to offices will affect footfall for retailers.
“Greggs will undoubtedly survive and be able to thrive once again,” said Julie Palmer, partner at business consultancy Begbies Traynor. “But its struggles tell the story of every business in the UK.
“What worked before the pandemic may not work during it. It, like many others, must adapt and change to the way that the world now works.”
Chloe Stephenson, Consumer Analyst at GlobalData, a leading data and analytics company, offered her view on the chain’s current challenges: “With a heavy reliance on in-store purchases, Greggs won’t be the only high-street bakery to have witnessed record-low footfall. As per GlobalData’s COVID-19 Recovery Tracker, 60% of UK consumers plan to stop or eat lunch outside of the home less often.
“To offset the decline of in-store sales, Greggs’ recent partnership with Just Eat offers a delivery service for the nation’s favourite baked goods for the first time ever. Greggs already has a reputation for its agile business strategy that meets the changing demands of its consumers, such as its highly anticipated vegan sausage roll. This new online offering may help the bakery maintain sales despite job cuts by meeting the demands of the 29% of UK consumers ordering more restaurant takeaways than before*.
“However, brand loyalty may become a thing of the past. Online delivery sites such as Just Eat essentially serve as comparison sites for consumers to choose the best option for them based on cuisine, localism or price. Moreover, with a national shift towards supporting small independent businesses following COVID-19, going local is now a top priority or significantly more important for 28% of UK consumers*. Within a highly competitive landscape, this may come as more bad news for Greggs.”