(Reuters) - Greggs, Britain's biggest seller of food-on-the-go, plans to spruce up its stores in a bid to persuade cash-strapped shoppers to buy more of its sandwiches and sausage rolls, after it posted a fall in 2012 profit.
Shares in the company, which has more outlets in Britain than burger chain McDonald's, dropped as much as 7 percent on Wednesday after it reported a deepening decline in underlying sales in recent weeks, due in part to bad weather.
New chief executive Roger Whiteside said the Newcastle, north east England-based firm would slow down the pace of new store openings in favour of stepping up investment in existing shops, giving customers more space for browsing, making more products available for self selection and providing more seats.
It will also roll out its more upmarket "Greggs the Bakery" format, while deciding on the potential expansion of its "Greggs Moment" cafes later this year.
"A refurbished estate should provide the group with greater pricing power, (and) the opportunity to improve the quality, and depth and breadth of their range," said Wayne Brown, analyst at Canaccord.
However, he estimated the short term cost meant a 3 percent cut to his 2013 profit forecast.
Retailers across Europe are battling a prolonged squeeze in consumer incomes as governments try to reduce their deficits. Germany's Metro said on Wednesday it was also stepping up investment in its main cash and carry business in a bid to reverse a decline in profit.
Greggs, which has 1,671 stores and sees scope for over 2,000, said it would slow its rate of new openings to a net 50-60 stores this financial year, from a net 100 in 2012.
It will more than double shop refurbishments to 250, investing 55-65 million pounds ($83-98 million), depending on the timing of the construction of a 30 million pounds frozen manufacturing facility in central England.
POOR WEATHER
Greggs, which says it had over 660,000 Facebook fans, made an underlying pretax profit of 51.9 million pounds in the year to Dec. 29, in line with analysts' average forecast but down from 53.1 million pounds in 2011.
Total sales rose 4.8 percent to 735 million pounds, reflecting the store openings as well as growth in wholesale sales to Iceland supermarkets and a franchise deal with Moto motorway service stations.
However, sales at stores open over a year fell 2.7 percent, hit by poor weather and declining high street footfall.
"People don't go out and eat two sandwiches on a Tuesday if they couldn't brave the weather on a Monday. Once we've lost a sale, we've lost a sale," said Whiteside, a former chief executive of pubs group Punch Taverns.
Even with its relatively low average transaction value of just over two pounds Greggs has not been immune to the economic downturn.
The firm said like-for-like sales were down 4.0 percent in the 11 weeks to March 16, with snow in January also hurting.
Whiteside said that though the firm would find cost savings to help mitigate the impact of commodity cost inflation some price rises for consumers were inevitable in 2013.
"There will be some but given the sort of brand we are, it will be literally pennies," he said.
Greggs is paying a dividend of 19.5 pence, up 1 percent - a 28th consecutive year of dividend growth.
Shares in the company, down 4 percent over the last year, were off 32.5 pence to 491 pence at 1135 GMT, valuing the business at about 509 million pounds.
($1 = 0.6615 British pounds) (Reporting by James Davey; Editing by Neil Maidment and Mark Potter)
