Baker Greggs bucked the doom and gloom on the high street with a rise in third-quarter sales, boosted by strong demand for its new Superstar Doughnuts range.
Shares in the Newcastle (Frankfurt: 725198 - news) -based firm rose nearly 4 percent on Thursday after it posted a 0.8 percent rise in sales at stores open over a year in the 13 weeks to October 1, its fiscal third quarter.
That represented an acceleration on growth of 0.4 percent in the first-half to July 2 and reflected investment in promotions, robust sales of breakfast and coffee lines and product innovation, of which Superstar Doughnuts was the standout performer, with 1.4 million sold in the five weeks since launch.
"We spoke to customers and said even in these tough times what would you really like to see in terms of doughnuts. We've ended up with a strawberry milkshake, a triple choc vanilla, a jaffa cake and coconut snowball doughnut," Greggs Chief Executive Ken McMeikan told reporters.
McMeikan, a former Tesco (LSE: TSCO.L - news) and Sainsbury (LSE: SBRY.L - news) 's executive and British Navy veteran of the Falklands War, said sales had been driven by the popularity of the doughnut range among Greggs (Other OTC: GGGSF.PK - news) ' 280,000 Facebook followers.
"Through social media marketing we gave each of the doughnuts their own voice where they were talking about themselves and interacting with Facebook fans."
Greggs, which also sells bread, sandwiches, savouries and cakes to over 6 million customers a week, said total sales rose 5.4 percent in the third quarter, partly reflecting 53 net new store openings.
The firm said it was on track to for a record 80 net new openings this year.
With 1,540 stores currently, Greggs has more outlets than McDonald's in the UK and sees scope for over 2,000.
Shares in Greggs, which prior to Thursday's update had lost 14 percent of their value over the last three months, were up 16.9 pence at 477.6 pence at 9:46 a.m. valuing the business at about 492 million pounds.
"This is a solid statement with like-for-like sales improving, albeit marginally, since the H1 results in July," said Liberum analyst Patrick Coffey.
British retailers are generally struggling as rising living costs force shoppers to rein in spending on non-essential items.
On Wednesday Tesco posted one of its biggest-ever quarterly falls in underlying sales, while rival J Sainsbury reported only modest growth.
Adding to the sense of gloom were profit warnings from mother and baby products firm Mothercare (LSE:MTC.L - news) and youth fashion retailer SuperGroup (LSE: SGP.L - news) .
Greggs, with its relatively low average transaction value of 2.25 pounds has fared better than most.
"We remain confident in the prospects for the group and our expectations for the year are unchanged," it said.
"Looking further ahead to 2012 there are signs of an easing in the rate of commodity price inflation in some areas, with the notable exception of energy."
Greggs is also looking at a series of new growth initiatives.
Following a trial in 10 Iceland shops it is rolling out the sale of frozen Greggs branded sausage rolls to more than 700 Iceland stores as it seeks to attack the take-home food market.
It is also trialling a coffee shop concept called "Greggs Moment" to gauge the potential for Greggs in this growing market.
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