Greggs warns on inflation but says sales of chicken goujons and potato wedges have helped boost sales as Britain returns to the office
- Total sales hit £495m, rising from £378m in the same period last year
- Shops in transport locations saw a ‘marked’ increase in activity in recent weeks
- Company left its full-year guidance unchanged despite rising cost pressures
Greggs has warned of rising cost pressures, but left its full-year outlook unchanged as sales of chicken goujons and potato wedges helped boost trade.
The bakery chain posted a 27.4 per cent rise in like-for-like sales in the first 19 weeks of the year, although it noted that the figure was flattered by comparison with last year when trading was impacted by Covid restrictions.
The baker has been boosted by Britain’s return to the office, as many firms adopt hybrid working meaning that trade has picked up substantially compared to when more were working solely or mainly at home.
Sales in larger cities and office locations have continued to lag behind the rest of its stores, Greggs said, but its shops in train stations and other transport hubs saw a ‘marked’ increase in activity in recent weeks.
Cost pressures: Greggs has seen a surge in the cost of raw materials, energy and staff
Like-for-like sales growth in the most recent 10 weeks to 14 May, when pandemic lockdowns in 2021 were easing, had averaged 15.8 per cent and Greggs expects this figure to continue to normalise going forward.
Total sales hit £495million, rising from £378million in the same period last year as the company kept its full-year guidance unchanged.
Sales of hot food and snacks were showing particularly strong growth, it said, with chicken goujons and potato wedges proving popular.
The bakery warned that inflationary pressures were increasing, but it was working to mitigate growing costs.
Greggs said in March it did not expect material profit growth in the current year on the £145.6million made in 2021 due to the surging cost of raw materials, energy and staff.
‘Looking ahead, market-wide cost pressures have been increasing and consumer incomes will clearly be under pressure in the second half of the year,’ it said.
‘We will continue to work to mitigate the impact of cost pressures whilst protecting Greggs’ reputation for exceptional value.
‘Whilst considerable uncertainties remain, we are in line with our plan and the Board’s expectations for the full year outcome remain unchanged.’
Greggs shares fell 1.3 per cent to £21.42 in early trading on Monday.
The company opened a net 43 new shops in the period, taking the total to 2,224. It sees potential for at least 3,000.
Ross Hindle, an analyst at Third Bridge, said Greggs faces multiple pressures, despite seeing sales bounce back strongly from the pandemic.
‘The big unknown is how consumers react to the rising costs and tightening of wallets,’ he said.
‘It is believed that there is an opportunity for Greggs to gain market share from ‘posh’ coffee shops and more expensive food-to-go operators as Britons cut back on their mealtime and beverage spend.
‘However, balancing market share opportunities with margin protection is likely to be a big challenge for Greggs. The Group will struggle to increase prices while still maintaining its value-for-money proposition in the market. Savoury and breakfast products are the most likely to be priced higher.
‘80% of Greggs’ range is manufactured in-house, providing some flexibility in how the Group navigates inflationary pressure. However, Greggs will still face intense cost headwinds.’