British high street baker Greggs said cost pressures are increasing across its operations, as it reported a rise in first quarter sales that was flattered by comparison with restricted trading conditions due to COVID-19 in the same period of 2021.
Greggs, known for its sausage rolls, steak bakes, vegan snacks and sweet treats, said its expectations for the full year were unchanged.
The group had warned in March that it did not expect material profit growth in the current year on the £145.6 million (€170.9 million) made in 2021 due to the surging cost of raw materials, energy and staff.
'Market-Wide Cost Pressures'
'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.'
Greggs said its like-for-like (LFL) sales in company-managed shops grew by 27.4% in the first 19 weeks of 2022.
Like-for-like sales growth in the most recent ten weeks to May 14, when pandemic lockdowns in 2021 were easing, had averaged 15.8% and it expected this figure to continue to normalise as it started to compare with more robust trading periods in 2021.
It said sales levels in larger cities and in office locations continued to lag the rest of the estate but transport locations had shown a marked increase in activity in recent weeks.
New Store Openings
Greggs, which recently announced a tie-up with fashion retailer Primark, opened a net 43 new shops in the first 19 weeks, taking the total to 2,224. It sees potential for at least 3,000.
Shares in Greggs, down 34% this year, closed Friday at 2,170 pence, valuing the business at £2.2 billion (€2.58 billion).
Commenting on the group's performance, Russ Mould, investment director at AJ Bell said, “The problem facing Greggs is like the one facing lots of businesses – for the first time in a generation inflation is a real factor. The cost of raw materials and staff is going up fast and that’s a particular problem for a value-based proposition like Greggs which has limited scope to pass on these costs to consumers if it is to retain its bargain credentials."