Greggs stated in its latest announcement that the Board expects the forecasts for 2022 to remain unchanged, however, the group did voice its concerns regarding inflationary pressure impacting its input costs and current market conditions drying out its customers’ pockets.
Greggs, the bakery chain, recorded a 27% increase in like-for-like (LFF) sales in company-managed shops which is relatively flat due to constraints in trading conditions during 2021.
For the group’s last update, LFL sales growth amounted to 16% in the 10 weeks up to 14 May when Covid restrictions were easing and Greggs foresaw this number improving as conditions “continue to normalise”.
Greggs said sales in cities and office locations “continue to lag” but transport locations saw a “marked increase” and reported total sales of £495m in the 19 weeks to May 14 from £378m.
The sale of hot food and snacks generated growth with chicken goujons and potato wedges proving to be the most popular.
Since the start of 2022, the group has opened 49 new shops which include retail parks and travel-based shops at Birmingham and Liverpool airports.
However, the group has also shut down 6 stores since January resulting in a total of 2,224 shops open during 2022. Out of the 2,224 operating stores, 1,831 are company-managed shops and 393 are franchised units.
For the rest of the year, Greggs notes a “strong pipeline” of acquisitions along with market-wide cost pressures. The group also has kept in mind the rising cost of living for its consumers and understands that they may be under pressure in the second half of the year.
Greggs said it will work to curb all headwinds from challenges regarding the market condition without damaging “Greggs’ reputation for exceptional value.”
Taking into consideration the uncertainties, the group says its plan is working and Greggs’ Board anticipates 2022 results to stay the same as previously forecasted.
Ross Hindle, Analyst, Third Bridge, said, “LFL sales grew 27.4% for the period, prompting management to suggest its full-year plan is set to remain on track.”
“As expected, sales in larger cities and commuter centres lag the rest of the market in terms of recovery, with the new work-from-home culture looking like it is here to stay. Footfall figures remain 6% below 2019 levels. However, Gregg’s strong store footprint has meant it’s outperformed the market from a footfall perspective.”
“However, balancing market share opportunities with margin protection is likely to be a big challenge for Greggs. The group will struggle to increase prices while still maintaining its value-for-money proposition in the market. Savoury and breakfast products are the most likely to be priced higher”
Hindle says “80% Greggs’ range is manufactured in-house” which gives the group some breathing room with inflationary pressure. He also explained that its experts predict “Greggs’ EBIT margin to continue to be under pressure” for the coming months due to higher costs.
Greggs’ shares dropped 1.15% to 2,145p in early morning trade on Monday despite the group reiterating its unchanged forecast for 2022 in its latest update.
