Gail's Bakery Announces Major Expansion Despite Widening Losses
The upmarket bakery chain Gail's has revealed ambitious plans to open 40 new outlets across the UK following a year of substantial sales growth. This expansion comes despite the company reporting widening pre-tax losses as it grapples with increasing operational costs.
Sales at the popular bakery and cafe chain rose to £278 million in the financial year ending February, representing significant growth driven by both new store openings and increased wholesale activity. However, the company's pre-tax losses expanded to £7.8 million, up from £7.4 million the previous year.
Retail Outperformance and Cost Pressures
The bakery's retail division demonstrated particularly strong performance, with sales surging by almost 23% - more than double the growth rate of its wholesale operation. The wholesale division supplies major retailers including Waitrose, Ocado and Amazon from its bakeries in London, Manchester and Bath.
Company directors highlighted that rising staff and energy costs had significantly impacted profit margins during the period. Additionally, the business invested £51 million in store reopening costs as it continued its aggressive expansion strategy, opening 36 new bakeries throughout the year.
Founder's Vision and Growth Strategy
Tom Molnar, who co-founded Gail's twenty years ago, recently spoke at a conference organised by Propel, emphasising that the business remains "still early in our growth". He reflected on the company's journey, noting that reaching the current count of 185 sites had taken two decades and hadn't always been straightforward.
"We do have a lot of bakeries now, but it took 20 years to get there," Molnar stated. "It wasn't easy, and it wasn't very fast. Twice, we had to stop growing altogether because we didn't think that we could be better; we were worried about getting consumed by speed."
The company's owners, led by private equity group Bain Capital, reportedly hired financial advisory company Goldman Sachs last year to help find new investors to drive further expansion. Industry estimates suggest the chain could be worth as much as £500 million.
Community Impact and Political Significance
Gail's expansion hasn't been without controversy. The rapidly growing chain has become an unlikely political indicator, used by the Liberal Democrats to identify areas where voters might be ready to switch from the Conservatives.
Some local communities have pushed back against new openings, with heated protests occurring in Walthamstow, east London, where hundreds of residents signed a petition to stop a Gail's branch from opening. In Brighton, a new branch was reportedly spray-painted with the word "boring" and a large image of a penis, according to local newspaper The Argus.
Despite these challenges, a Gail's spokesperson expressed optimism about the company's future, telling the Propel trade journal: "We are pleased to have delivered strong year-on-year growth. This performance is underpinned by the increasing demand for high-quality, nutrient dense food, and by the support of the communities we serve."
The company was originally founded by Yael (Gail) Mejia in the early 1990s, initially serving restaurants and other venues in London. Molnar and several others joined Mejia in 2003, with the group opening the first bakery cafe in Hampstead in 2005.
