Greggs says demand picks up in August and September

LONDON, Oct (KOSDAQ: 039200.KQ - news) 9 (Reuters) - Greggs (Other OTC: GGGSF - news) , Britain's biggest seller of food-on-the-go, saw underlying sales decline at a slower rate in its third quarter as demand picked-up in August and September after a heatwave hit sales in July.

The firm, which with close to 1,700 shops has more outlets in Britain than burger chain McDonald's, said sales at stores open over a year fell 0.5 percent in the 13 weeks to Sept. 28. That compares with a first half decline of 2.9 percent.

Total (NYSE: TOT - news) sales grew 3.6 percent, driven by net new shop openings and growth at franchised shops.

Data and surveys have shown an improving outlook for UK consumer spending, which generates about two-thirds of gross domestic product, but retailers remain wary as inflation continues to outstrip wage rises.

Even with its relatively low average transaction value of just over two pounds Greggs, which sells bread, sandwiches, savouries, cakes and pastries to over 6 million customers a week, has not been immune to the downturn with fewer shoppers on Britain's high streets and unhelpful weather leading to two profit warnings this year.

"We are encouraged by the recent improvement in like-for-like performance, although with consumer disposable incomes still under pressure we remain cautious," said chief executive Roger Whiteside.

"Cost inflation is in line with our expectations and the group's cash position remains strong. Our overall outlook for the full year is unchanged."

Greggs is refitting and re-shaping its store portfolio as it attempts to gain a bigger slice of Britain's 6 billion pounds ($9.66 billion) food-on-the-go market.

So far this year it has refitted 141 shops and plans 215 in the full year. It now expects no increase in net shop numbers this year as openings match closures.

Shares in Greggs, down 18 percent over the last year, closed Tuesday at 427.3 pence, valuing the business at 433 million pounds.