Greggs (GRG.L) has started consultations with staff on reducing hours at 800 of its shops, potentially putting hundreds of jobs at risk if a deal can’t be reached.
In a trading update on Tuesday, the bakery chain said it had started talks with unions and staff on reducing working hours. The consultation process is due to last until November.
A spokesperson declined to say how many jobs were at risk but confirmed the consultation affects 800 of Greggs’ 2,000 stores. The company employs about 25,000 people across the UK.
“Our aim is to minimise the risk of job losses by negotiating reduced hours in our shops and we will update on the outcome of the consultation when concluded,” the company said.
Greggs blamed a downturn in trading and the looming end of the government’s coronavirus job protection scheme, which is due to end next month.
“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,” Greggs said.
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Details of the consultation process came as Greggs reported subdued sales. The bakery chain said sales had picked up in September after a “challenging” August, but remained only 76.1% of last year’s levels.
Susannah Streeter, a senior investment and markets analyst at Hargreaves Lansdown, said Greggs needs to operate at 80% of 2019 sales to break even, helping to explain the rationale for reducing employee costs.
As well as hitting demand, COVID-19 has also affected Greggs’ supply chain. A small outbreak at a Leeds distribution centre closed the facility for a week last month and led to shortages at some Greggs in the region. Last week, a Greggs baking factory in Newcastle was hit by another small outbreak.
The company said disruptions like these would “be an ongoing challenge as we prioritise employee safety and play our part in managing COVID-related risks.”
Greggs said future trading activity “remains uncertain.”
Shares fell 4.2% in early trade:
“What is clear though is that Greggs, through no fault of its own, has had its world turned upside down,” Clive Black and Darren Shirley, analysts at stockbroker Shore Capital, wrote in a note on Tuesday.
“We continue to openly wonder how many Greggs stores will remain open when the firm is through the current crisis.”
Black and Shirley said new COVID-19 restrictions in the North-East, where Greggs is based, “will do little for October trading momentum.”
Despite all these challenges, Greggs said it planned to restart its store expansion programme. The company aims to open net 20 new sites this year, with most new openings drive-through sites.