UK bakery chain Greggs has warned that cost inflation will remain stubbornly high at between 9-10 per cent this year, as the food-on-the-go retailer shrugged off cost pressures to announce more store openings.
Greggs, the vendor known for its sausage rolls, said on Tuesday that it would open 150 new stores nationwide this year by expanding its footprint in retail parks and city transport hubs. It also plans to trial 24-hour drive-through locations.
“Cost inflation will continue to be a challenge, driven particularly by pay awards and energy costs, but we are confident that our value proposition will remain compelling as customers look to make their money go further,” said Roisin Currie, Greggs’ chief executive.
She added that “although consumer incomes remain under pressure” the retailer’s affordable offering continued to attract customers. Greggs increased prices by between 5p and 10p twice last year.
The company posted like-for-like sales growth of 17.8 per cent year on year, pushing total sales up to £1.5bn last year. Pre-tax profits grew 1.9 per cent year on year to £148mn “reflecting strong sales growth in the face of significant cost inflation and the removal of government pandemic support”, the company added.
Greggs said its trading was boosted by extending the opening hours at a greater number of stores. Some 500 sites already stay open until 8pm and 300 shops will be extended to 9pm this year.
The retailer said its increasingly popular delivery service, which accounts for 5 per cent of total sales, and its loyalty programme run through the Greggs App, which now has 1.1mn active users, also drove sales growth.
It said there was a “clear opportunity” to have “significantly more than 3,000 UK shops” from 2,238 outlets currently.
Coffee chain Starbucks said on Monday that it planned to add 100 UK stores this year, defying concerns over a consumer downturn driven by the cost of living crisis.
Like-for-like sales in Greggs’ owner-operated shops were up 18.8 per cent in the first nine weeks of 2023, the company added. The share price was broadly flat in early morning trading in London.
John Moore, senior investment manager at RBC Brewin Dolphin, said Greggs had delivered “good growth in tough times”, but he added: “If this year was about demonstrating its resilience in a tough economic climate, next year will be about recovering some of its lost [profit] margin through further efficiencies and potentially marginal price increases, while maintaining its value proposition.”
