Greggs to open hundreds more sites and double up on sales despite supply chain and pricing woes
Greggs is pushing ahead with plans to open more stores across Scotland and the rest of the UK despite warning of supply chain issues and pricing pressures.
News of the continued expansion came as the bakery chain lifted its profit outlook for the year after surpassing pre-pandemic sales.
The firm, which already has more than 2,100 stores, said it has "not been immune" to well-publicised supply chain pressures affecting the UK's food and drinks firms.
In a trading update to investors, bosses noted that there has been "some disruption to the availability of labour and supply of ingredients and products in recent months".
Greggs also cautioned that it expects costs to climb at the end of 2021 and into next year.
"Food input inflation pressures are also increasing - whilst we have short-term protection as a result of our forward buying positions we expect costs to increase towards the end of 2021 and into 2022," it noted.
"Operational cost control has been good and the strong sales performance in the third quarter gives us confidence as we move into the autumn.
“Subject to any unexpected Covid disruption we expect the full-year outcome to be ahead of our previous expectations,” the firm added.
The chain revealed that like-for-like sales increased by 3.5 per cent in the third quarter of the year, against the same period from 2019.
Greggs has increased its store estate by 68 branches since the start of the year, including new drive-thru locations, and said it expects to have expanded by around 100 outlets in 2021.
The Newcastle-headquartered firm, which is famous for its steak bakes and sausage rolls, said it will accelerate its opening programme next year, with around 150 net openings planned as it pushes towards its long-term goal of 3,000 stores across the UK.
It said it also has ambitious plans to double its turnover to around £2.4 billion in the next five years, as it seeks to grow its delivery and evening operations further.
Richard Hunter, head of markets at Interactive Investor, said: “Greggs’ no-nonsense, value approach has succeeded where others have struggled, despite broader pressures outside of its control.
“The company remains understandably guarded on the outlook, with staffing and supply chain disruption still rampant. At the same time, inflationary pressures are elevated, especially in food, although the fact that the company has been forward buying has given Greggs some short-term protection.
“Even with this currently strong performance, the company is not resting on its laurels.”
Ross Hindle, an analyst at Third Bridge, noted: “Greggs has turned up the heat on the food-to-go sector with its launch of new vegan products and its punchy plan for additional store openings.
“The group has opened 68 stores year-to-date (net of store closures) with management continuing to expect the group to open 100 stores by year end.
“Supply chain issues and labour shortages remain a key risk for Greggs with no end in sight. Temporary interruptions for some ingredients could result in the group reducing its range and would hamper current momentum.”