Introduction: Greggs sees inflation pressures reducing; Sainsbury’s sales rise
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
UK bakery chain Greggs has declared that inflation pressures are “reducing”, as it reports a strong rise in sales last year.
Greggs, which sells steak bakes, sausage rolls, doughnuts, wraps and breakfast rolls, has posted like-for-like sales of 13.7% for the last year.
Total sales jumped almost 20% to £1.8bn, boosted by a flurry of store openings – a net increase of 145 last year as Greggs targeted retail parks and travel hubs.
Inflation has pumped up retailers’ sales growth in the last couple of years. Greggs’ sales growth slowed in October-December, though, with like-for-like sales up 9.4% – due to a “reduced contribution from price inflation”.
That slowdown in price rises should continue, Greggs suggests, in a boost to consumers.
Greggs says:
As expected, inflationary pressures are reducing and with good forward cover on food, packaging and energy we anticipate a more stable cost base in the coming year.
Wage inflation remains, although higher rates of pay across the economy will also provide support to consumer incomes.
Official data has shown that consumer price pressures slowed last year, with inflation slowing to 3.9%.
Greggs also reports high sales of its Festive Bake, Chocolate Orange Muffin and Christmas Lunch Baguette in the fourth quarter of last year, while pizza sales continue to grow too.
We also have Christmas trading figures from supermarket chain J Sainsbury this morning. And they also point to easing inflation pressures.
Sainsbury’s has reported a jump in sales over the key Christmas period, with improved grocery sales volumes as food and drink inflation slowed.
Grocery sales in the last 16 weeks rose by 9.3%, while sales over Christmas were 8.6% higher. Sainsbury’s says stronger volume growth offset lower inflation, and is sticking with its existing profit forecasts.
Sainsbury’s says:
Our consistent focus on delivering great value, innovation, quality and service has driven sustained sales growth despite significantly lower inflation, with volume growth ahead of the market every week since March.
However, the firm witnessed a drop in trade for clothing and in its Argos business.
Sales at Argos, the catalogue business, fell by 4.2% in the six weeks over Christmas (to 6th January), suggesting consumers cut back in the cost of living squeeze.
Also coming up today
The World Economic Forum will release its latest Global Risks report this morning, highlighting the most serious threats which global leaders must tackle.
This afternoon, MPs on the Treasury Committee will question senior officials from the Bank of England, about the threat to financial stability posed by interest rate rises.
The committee is likely to examine the impact of recent UK interest rate rises on the UK’s economic resilience and financial stability.
The committee says:
The decision to increase and then hold the Bank Rate has seen UK households and businesses face rapidly increasing running costs while borrowing also becomes a more costly option.
Members of the Committee are likely to probe whether these pressures could have implications for the UK’s economic resilience.
The agenda
Key events
Sainsbury’s shares have dropped by 5% to the bottom of the FTSE 100 leaderboard, to a one-month low of 290p.
Investors are unimpressed, even though the company reported sales growth over Christmas and is sticking with its profit forecasts.
Michael Hewson, analyst at CMC Markets, says Sainsbury’s numbers show “a solid performance”, but the City may have expecting a little bit more given “recent declines in the cost of living and the big jump in UK retail sales seen in November”.
Hewson says:
It is clear from today’s numbers from Sainsbury that consumers prioritised their spend over the Christmas period towards food and drink, eschewing more discretionary spending on bigger ticket items, even as the pressure on the cost-of-living continues to ease.
On a more positive note, Sainsbury did maintain its full year guidance for adjusted pre-tax profit of between £670m and £700m and free cash flow of £600m, however the shares have slipped back on disappointment that there was no upgrade to its full year guidance.
Greggs shares jump to five-month high
Shares in Greggs have jumped to a five-month high at the start of trading in London, as investors hail its sales growth.
Greggs shares have risen by 9% to £2,698, their highest level since 1 August.
That makes them the top riser on the FTSE 250 index of medium-sized companies listed in London.
Greggs shares on a roll today 👀
Like for like sales up 13.7%
Total sales for FY 23 +19.6% at £1.81bn— Michael Hewson 🇬🇧 (@mhewson_CMC) January 10, 2024
2023 was a year of “real progress” for Greggs, says Matt Britzman, equity analyst at Hargreaves Lansdown, after a “solid final quarter”
Britzman explains:
Double-digit growth in like-for-like sales was down to extended opening hours, more delivery options, improving supply chain capacity and a fresh new suite of tasty treats.
Festive Bakes and Chocolate Orange Muffins lead the way over Christmas but bears may point to sales growth slowing over the year, and the fourth quarter was the lowest of 2023. That’s largely because Greggs was able to limit price hikes as inflation cooled.
Longer-term, that’s a net positive. One of Greggs’ key strengths is offering a lower value treat and keeping that proposition intact is key, especially when consumer incomes are stretched. The most important thing is to see volumes trend higher, and that remains the case.
Greggs to open up to 160 new stores this year
Greggs says it plans to increase its store numbers by up to 160 this year.
The bakery chain says it ended last year with a cash position of £195m, which it will invest in growing its shop estate and also its supply chain capacity.
In today’s financial results, it says:
The pipeline of new shop opportunities remains strong, and we expect to open between 140 and 160 net new shops in 2024.
It currently has 2,473 shops trading, after opening 220 new shops in 2023, closing 33 and relocating 42 (giving a net increase of 145 last year).
Roisin Currie, chief executive of Greggs says:
“We enter 2024 with plans to continue to invest in our shops and expand supply chain capacity to deliver the growth strategy, supported by our strong balance sheet.
Introduction: Greggs sees inflation pressures reducing; Sainsbury’s sales rise
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
UK bakery chain Greggs has declared that inflation pressures are “reducing”, as it reports a strong rise in sales last year.
Greggs, which sells steak bakes, sausage rolls, doughnuts, wraps and breakfast rolls, has posted like-for-like sales of 13.7% for the last year.
Total sales jumped almost 20% to £1.8bn, boosted by a flurry of store openings – a net increase of 145 last year as Greggs targeted retail parks and travel hubs.
Inflation has pumped up retailers’ sales growth in the last couple of years. Greggs’ sales growth slowed in October-December, though, with like-for-like sales up 9.4% – due to a “reduced contribution from price inflation”.
That slowdown in price rises should continue, Greggs suggests, in a boost to consumers.
Greggs says:
As expected, inflationary pressures are reducing and with good forward cover on food, packaging and energy we anticipate a more stable cost base in the coming year.
Wage inflation remains, although higher rates of pay across the economy will also provide support to consumer incomes.
Official data has shown that consumer price pressures slowed last year, with inflation slowing to 3.9%.
Greggs also reports high sales of its Festive Bake, Chocolate Orange Muffin and Christmas Lunch Baguette in the fourth quarter of last year, while pizza sales continue to grow too.
We also have Christmas trading figures from supermarket chain J Sainsbury this morning. And they also point to easing inflation pressures.
Sainsbury’s has reported a jump in sales over the key Christmas period, with improved grocery sales volumes as food and drink inflation slowed.
Grocery sales in the last 16 weeks rose by 9.3%, while sales over Christmas were 8.6% higher. Sainsbury’s says stronger volume growth offset lower inflation, and is sticking with its existing profit forecasts.
Sainsbury’s says:
Our consistent focus on delivering great value, innovation, quality and service has driven sustained sales growth despite significantly lower inflation, with volume growth ahead of the market every week since March.
However, the firm witnessed a drop in trade for clothing and in its Argos business.
Sales at Argos, the catalogue business, fell by 4.2% in the six weeks over Christmas (to 6th January), suggesting consumers cut back in the cost of living squeeze.
Also coming up today
The World Economic Forum will release its latest Global Risks report this morning, highlighting the most serious threats which global leaders must tackle.
This afternoon, MPs on the Treasury Committee will question senior officials from the Bank of England, about the threat to financial stability posed by interest rate rises.
The committee is likely to examine the impact of recent UK interest rate rises on the UK’s economic resilience and financial stability.
The committee says:
The decision to increase and then hold the Bank Rate has seen UK households and businesses face rapidly increasing running costs while borrowing also becomes a more costly option.
Members of the Committee are likely to probe whether these pressures could have implications for the UK’s economic resilience.
