Greggs enjoys sales surge despite inflation burden and looks to open stores longer: reaction
Bakery and snacks chain Greggs has seen sales leap by almost 15 per cent over the past three months as cash-conscious consumers opt for value meals.
The chain, which has more than 2,200 outlets across the UK, said sales slowed during August as people ditched the staycations that had been fuelled by the pandemic, but that momentum returned in September.
In a trading update to investors, it said the sales increase comes “in an environment where cost pressures are significant and our outstanding value-for-money positioning is ever-more important to consumers”.
Greggs also noted that its sales growth dipped by about 1 per cent as a result of closing its shops for the Queen’s funeral on September 19.
Cost inflation for the year is expected to remain at its previous estimations of 9 per cent on last year as the retailer faces surging costs of raw materials, production and energy.
The chain, which has recently launched its new autumn menu including the pumpkin spice latte and the chicken and stuffing baguette, previously announced that customers would see 5p or 10p increases on some items as it was forced to raise prices for the second time this year.
But the firm said it has fixed prices with suppliers for a good level of its future food and energy costs.
The business has driven forward its expansion plans and is set to have opened 150 new stores for the year as a whole, including two drive through branches, in Amesbury and Durham.
Despite the “considerable uncertainty” across the wider economy, Greggs made no changes to its full-year profit guidance in its latest market snapshot.
Retail analysts at brokerage Shore Capital noted: “With respect to the [2022 full-year] expectations, the business states that it ‘expects to be in line with our previous expectations’, which is a relief that may be reflected in today’s share price movement given a plethora of disappointing recent news from across the domestic consumer patch.
“Lengthening the trading day is a key objective for Greggs as it seeks to build its revenues and further utilise its asset base. Whilst not sceptical as to its plans, we observe with interest to see how its assortment evolves to compete in the evening trade where there is a different meal occasion and also competitor set. Cracking this market would represent a major opportunity for Greggs that is for sure.”
Julie Palmer, a partner at Begbies Traynor, the business services and restructuring specialist, said: “The pastry powerhouse has delivered yet again. In an economy where customers are looking to cut costs at every opportunity, Greggs has a significant advantage over its pricier competitors like Pret and today’s trading update shows no shakeup to the first half’s momentum.
“Businesses across every sector are facing the same issue of rising costs and ingredients and energy and labour aren’t going to get cheaper. Throw in the weakest consumer confidence in years and it’s a truly difficult market. Despite this, Greggs has confirmed it has a decent level of cover in the final quarter and beyond.
“This means that the small price increases recently introduced are being held; something that will please sausage roll lovers up and down the country.”