Greggs has raised prices for the second time this year and warned of further increases, despite attempts by the bakery chain to mitigate the impact of inflation on customers.
The retailer, which runs about 2,200 shops across the UK, reported £694.5mn in total sales in the first half of the year, up about 27 per cent on 2021 and before the coronavirus pandemic in 2019.
Pre-tax profit increased by just 0.5 per cent over the same period to £55.8mn, with the chain blaming the reintroduction of business rates, an increase in value added tax and higher costs.
Greggs said it had increased prices again even though it had “worked hard to mitigate the impact of rising costs on customers”. Product prices have risen by a further 5p to 10p, including the bakery chain’s signature sausage roll, which has increased from £1.05p to £1.10p.
Cost inflation “increased significantly” in the first half “driven by food, packaging and energy commodities”, Greggs said. The biggest production cost increases in recent months have come from dairy products.
The company now predicts overall cost inflation of about 9 per cent in 2022. However, the retailer said the small price increases it had made so far have not appeared to have affected sales.
Finance director Richard Hutton stressed that Greggs was “fiercely defensive” of its affordable prices, adding that it tries to “avoid moving the prices any more than we have to” in order to retain customers.
In an attempt to limit a further impact from inflation, the retailer has fixed production costs for food, packaging and energy for the next five months.
However, Hutton admitted that further price rises were inevitable. “I can’t guarantee when it will be, but I do know that prices will move again one day,” he said.
Despite fears over a consumer downturn, Greggs said it was pushing ahead with plans to expand its UK estate to as many as 3,000 shops.
The retailer opened 70 stores in the first half of the year and plans to open a further 80 by the end of the year, focusing on expanding its presence in retail parks and railway stations and airports.
Greggs has also added 13 Central London stores over the past 18 months, taking advantage of cheaper rents in the fallout of the pandemic.
The retailer said it could sustain a net increase of 150 shops a year beyond 2022.
“We are well positioned to navigate the widely publicised challenges affecting the economy and continue to have a number of exciting growth opportunities ahead, with a clear strategy for expansion,” said Roisin Currie, who took over as chief executive from industry veteran Roger Whiteside in May this year.
Greggs’ share price closed up 2.4 per cent to £21.26 in London on Tuesday.
Currie said the “exceptional value” of Greggs would help it succeed “in a market where consumer incomes are under pressure”.
Source: Economy - ft.com
