London, March 10 - British baker Greggs posted an expected 7.8 percent fall in full-year profit and said it expects marginal sales growth this year due to the recession, after heavy snow hit demand in February.
The company, which sells sandwiches, savouries and cakes from more than 1,400 outlets, said it has budgeted for only "marginally positive" like-for-like sales growth throughout 2009 and has planned its costs accordingly.
It said although ingredient and energy costs remained high, it expected to see some benefit from these easing during the second half of the year.
Greggs, which is debt free, also proposed a total dividend of 149 pence, up a better-than-expected 6.4 percent, and said it plans a 10-for-one share split to make the shares more accessible and appealing, particularly to small shareholders and employees.
Its sales in the 10 weeks to March 7 rose 1.0 percent on a like-for-like basis, which strips out the impact of new space.
"The first two weeks of February were significantly impacted by the snow that affected most of the UK. Excluding these two weeks like-for-like sales have increased by 2.9 percent," it said.
By 1007 GMT, Greggs shares were up 17 pence at 3562 pence, valuing the business at 374 million pounds ($532 million).
Heavy snowfall brought large swathes of Britain to a standstill in early February, during the country's coldest winter for more than a decade. Earlier on Tuesday, the British Retail Consortium cited the snow as one of the factors behind a 1.8 percent fall in retail sales that month. [ID:nLAG003283]
Greggs, which has more than 5 million customers a week, spending on average 2 pounds, made an underlying profit before tax of 45.2 million pounds for the year to Dec. 27, 2008, broadly in line with analysts' expectations, on sales up 7.1 percent to 628 million pounds, up 4.4 percent like-for-like.
The profit fall reflected slower-than-expected sales growth in August and September due to poor weather, along with energy and ingredient cost increases that were not passed on in full to consumers as Greggs sacrificed margin to defend market share.
"What our customers were asking us to do was try and help them with their budgets to make their money go as far as it could," Chief Executive Ken McMeikan told reporters, pointing to a range of sandwiches introduced for 99 pence and below that had driven an increase in sales.
He also said he was relaxed by the competitive threat posed by the likes of Subway and the supermarkets. "In effect what I think I've been seeing is the competition actually reacting to us," he said.
Altium Securities analyst David Stoddart trimmed his 2009 pretax profit forecast from 45.4 million pounds to 44.0 million, arguing sales growth will be insufficient to offset cost growth.
Having opened 41 new stores in 2008, Greggs plans just 10 in 2009 before accelerating its expansion from 2010.
Greggs also announced the disposal of its 10-shop loss-making Belgian business to Foodmakers NV.
Shares in Greggs have shed 16 percent of their value over the last year, a performance in line with the UK food and drug retailer index.