Cost of living winner: Greggs sees sales jump 23% after adding scores of stores
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The bakery and snacks chain said total sales rose 23 per cent over the year to hit £1.51 billion, up from £1.23bn the previous year. Year-on-year sales in the final three months of its financial year grew by 18 per cent across its own-managed shops, which the group said was caused by a boost in visitors over Christmas despite battling bad weather and rail strikes. The increase also reflects the Omicron coronavirus variant dampening sales over the same period in the previous year.
The chain, which has more than 2,300 shops across the UK, has been pushing ahead with plans to grow its estate, adding 186 new shops over the year, while also closing 39. Around 440 of its total shops are franchised, meaning they run in locations such as train stations, petrol stations and motorway services, rather than being fully owned by Greggs itself.
Bosses admitted that inflation continues to hit costs and put pressure on consumers, with the group previously estimating that costs had gone up by about 9 per cent on average over 2022, compared with the previous year. It forced the company to raise prices of some of its key food items, with its popular sausage roll going up in price three times last year, as well as upping the price of certain meal deals.
However, it reassured investors that its meals remain good value and therefore attractive to the cash-conscious consumer, and it expects to meet its full-year profit expectations despite the challenging conditions faced last year. It also revealed that it has been extending opening hours, with 500 shops now open until 8pm, meaning that sales during the early evening are growing fast.
Sophie Lund-Yates, lead equity analyst at investment platform Hargreaves Lansdown, said: “The bakery chain’s pricing is being held as a key area of strength in current conditions, and has meant that together with cost savings, margins have held up for the full year. Specifically, demand has been helped by a strong reaction to Greggs’ festive goods, including the Festive Bake and vegan options.
“Essentially, Greggs has a lot going in its favour because it exists at the end of the value spectrum, and the group is capitalising on this. However, it will be crucial to closely monitor how out-of-home spending shapes up, because any worse-than-expected drop offs would be bad news for profits when combined with soaring costs.”
Adam Vettese, an analyst at social investing network eToro, noted: “Greggs’ impressive fourth-quarter sales growth suggests its business model is holding up well in the face of the worst cost-of-living crisis in a generation. At the same time, the nation’s favourite baker is clearly in tune with its customer base, with its vegan range continuing to play a larger role in its range. Looking forward, while things will be tight financially for households in 2023, Greggs’ focus on value-for-money and convenience should hold it in good stead.”