There is no stopping bakery chain Greggs who recorded another year of sales and profit growth as the chain opened more stores and kept them open later.
The UK’s insatiable demand for the humble sausage roll helped Gregg’s total revenue increase 19.6% and like-for-like sales rise 13.7% in 2023.
Greggs is now the UK’s top food-to-go company according to YouGov’s Brand Index and has a total share of visits of 8.2%.
Even though the group said costs have increased over the last year, Greggs maintained healthy margins and underlying profit before tax rose 13.1%.
“Greggs has enjoyed an excellent year despite the challenging economic environment. Sales and profits have both risen, despite significant cost inflation, and the group is returning more cash to shareholders through dividends. All in all, an impressive performance,” said Charlie Huggins of Wealth Club.
In terms of costs, investors will be encouraged to learn Greggs sees cost increases slowing going forward which will be supportive of earnings. Greggs said in a statement: “inflationary pressures are reducing and we have improved visibility of costs in the coming year.”
The company has consistently expanded its presence across the UK with new store openings and opening stores later into the has helped bolster the top line.
“Greggs continues to show why it’s the UK’s leading food-to-go brand (YouGov’s Brand Index). This is a business intent on growing, aiming to surpass 3,000 UK shops while enhancing its multi-channel approach for better service. Digital channels are booming, with delivery sales up 23.6% last year following partnerships with Just Eat and Uber Eats,” said Matt Britzman, equity analyst, Hargreaves Lansdown.
“Greggs is extending hours to capture more of the evening market and bolstering its brand to both deepen loyalty and attract new customers.
“Greggs is far more than just a treat, and its value offering puts it in a sweet spot with consumers still battling higher living costs. Maintaining that price point is key, and with cost inflation easing Greggs is making sure customers feel the benefit too. That’s likely to be a small drag on sales growth this year compared to last, but there are plenty of other growth avenues to target.”
Strong operating profit growth is translating into higher shareholder distributions with an increased ordinary dividend and a bumper 40p special dividend.
Greggs ordinary dividend isn’t anything to write home about but the additional 40p special dividend means payouts will total 102p per share.
“Investors don’t have to sit and wait while the growth strategy plays out. Greggs already boast a modest 2.6% forward yield and today’s special dividend is further evidence that the board’s keen to pay investors while it expands.”
