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Wed 29th Jul 2015 - M&B reports 0.8% like-for-like growth in subdued market
M&B reports 0.8% like-for-like growth in subdued market: Mitchells & Butlers has reported like-for-like sales grew 0.8% in the 11 weeks to 25 July, with food like-for-likes up 2.5% but drink sales down 1%. Total sales growth in its third quarter was 5.0%, bringing growth in the first 43 weeks to 8.2%. The company stated: “Like-for-like sales continued to grow over the third quarter, with strong food sales offsetting a softer drinks performance. As previously reported, operating margins are below last year reflecting the lower margin of Orchid ahead of full integration and sales growth being driven by food volumes. As a major employer of more than 42,000 people, the recently announced introduction of the national living wage will have an impact on our cost base from its introduction in April 2016. We are assessing a wide range of options to mitigate the impact whilst continuing to focus on retaining and attracting the best people to work in our pubs, bars and restaurants. So far this financial year we have opened 11 new sites and converted 43 sites, including 32 conversions of Orchid sites to core M&B brands including Toby Carvery, Miller & Carter, Harvester and Ember Inns.” Chief executive Alistair Darby said: “This year we have continued to successfully grow our food volumes and our like-for-like sales ahead of a subdued market, in addition to integrating and converting the Orchid business as planned. These initial conversions are trading well and in line with our expectations.”

Greggs reports like-for-likes up 5.6% in first half: Bakery business Greggs has reported like-for-like sales up 5.9% (2014: 3.2%) in the 26 weeks to 4 July. Total sales were up 6.4% to £398m (2014: £374m). Prior year restructuring benefits contributed £2.4m year-on-year. Pre-tax profit was £25.6m (2014: £16.9m excluding exceptional items). The company reported continued growth in average transaction value and customer visits. A total of 118 refits and 12 café conversions completed with a return to net shop growth (44 new shops opened, 30 closures). A total of 1,664 shops were trading at 4 July 2015. Chief executive Roger Whiteside said: “We have had a strong first half with good growth in sales reflecting improvements in our products and the reaction to our shop investment programme. Our offer of great tasting food-on-the-go is being well received by the consumer in market conditions that have remained favourable. In particular we have seen significant growth in breakfast sales as well as from the extension of our “Balanced Choice” range of sandwiches and flatbreads with fewer than 400 calories. With the shop refurbishment programme continuing to progress well and new additions to the product range including pizza slices, we are confident of delivering a year of good growth slightly ahead of our previous expectations. We have continued to make good progress in delivering the actions that support our strategic plan:

1. Great tasting fresh food: In the first half we have driven increased customer transaction numbers and higher average transaction values through our product initiatives and value deals. All of our food-on-the-go categories delivered like-for-like growth in the first half with sandwiches in particular benefiting from the range relaunch in June last year. Our “Balanced Choice” range grew strongly with successful new additions including “no added sugar” drinks and new and improved salad options. All Balanced Choice products contain fewer than 400kcal and rate as either green or amber on the FSA traffic light system. Breakfast continues to be our fastest growing part of the day and we have successfully extended our breakfast menu, adding new porridge and breakfast sandwich options. These include a free-range egg option that has attracted the “Good Egg Award”. We continue to invest in the value of our food and drinks, and now offer “any savoury product plus a drink” for £2. This has quickly established itself alongside our £2 “sweet and drink” offer as a favourite with customers.

2. A great shopping experience: We have extended further the times at which our shops are available to customers with three quarters now open by 7am and more than two thirds open on Sundays. Our investment in operational planning systems is helping to ensure that we deliver great service by deploying the right level of staffing across the day and we have started to introduce new replenishment processes targeted at improving product availability. We have also made good progress on the significant programme of investment in upgrading our estate. During the first 26 weeks we completed 118 shop refurbishments to our latest “bakery food-on-the-go” format and have commenced the conversion of our larger bakery cafés, with 12 completed in the first half. This is in line with our plan to update 200 to 220 shops during 2015. The overall quality of our shop estate has continued to improve through our shop opening and closure programme and we have returned to net shop growth. We opened 44 new shops (including 25 franchise units) and closed 30 shops, giving a total of 1,664 shops (of which 70 are franchise units) trading at 4 July 2015. We expect shop numbers for the full year to increase by a net 20-30 shops overall.

3. Simple and efficient operations: The first half result benefited from the restructuring of our in-store bakeries and support operations carried out in 2014. The year-on-year benefit of this was £2.4 million and a further £0.6 million benefit will accrue in the second half of 2015 as the impact of this annualises fully. Our other ongoing structural cost reduction plans are progressing well and are on track to save £5-6 million in the year as a whole. Better processes around procurement and product management have delivered lower costs and reduced waste and we continue to consolidate production activity by focusing on centres of excellence in our supply chain. The proposed increases to the minimum wage are likely to drive inflationary pressure in the broader sector over the coming years. We have consistently paid rates of pay above this level, with our standard rate for hourly-paid shop staff at £7.11, currently nine per cent higher than the national minimum wage. We are assessing the medium-term impact of further increases on our business.

4. Improvement through change: We are making good progress with the major overhaul of our processes and systems and remain on track to introduce new ways of working in central forecasting and replenishment and customer relations. Plans are also well advanced for the next major phase of change which will focus on core elements such as finance, purchasing and retail back office administration.”

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