GREGGS is to raise prices amid increased costs and it said sales in office locations in larger cities have lagged behind other sites.
The baker said that like-for-like sales at the shops it manages rose by more than 27 per cent in the first 19 weeks of this year, compared to 2021.
However, it also pointed out that this was a flattering comparison due to the Covid restrictions in place a year ago.
In the ten weeks to May 14, a period when restrictions were easing in 2021, sales were up nearly 16%, Greggs said.
Total sales in the 19 weeks to May 14 2022 were £495 million, against £378m the same time the year before.
“Sales levels in larger cities and in office locations continue to lag the rest of the estate but transport locations have shown a marked increase in activity in recent weeks,” the company said.
“Sales of hot food and snacks are showing particularly strong growth, with chicken goujons and potato wedges proving popular.”
READ MORE: Glasgow firm helps deliver world's largest Greggs
It warned of increasing costs and said customers should expect further price rises as a result.
In an update to shareholders the company said costs had been increasing across the market.
Roger Whiteside, who is stepping down as Greggs’ chief executive, said the business is in the process of working out its latest potential price increases due to cost inflation.
“At the start of the year we made some increases and then, when the reduced rate of VAT went back to normal, we had to add that back onto prices where we’d been able to pass the reduction to customers during Covid,” he said.
“We are now going to have to make some increases again soon.
“It will be on selected items, but it will be across different areas, so there might be 5p or 10p increases on some products.”
Greggs also said customers will be experiencing financial pressures from the rising cost of living, something that could cause people to spend less.
One analyst said that this could ultimately help Greggs. As workers look for cheaper alternatives for lunch, the chain might attract new customers away from its rivals.
Ross Hindle, an analyst at Third Bridge, said: “The big unknown is how consumers react to the rising costs and tightening of wallets. It is believed that there is an opportunity for Greggs to gain market share from ‘posh’ coffee shops and more expensive food-to-go operators as Britons cut back on their mealtime and beverage spend.
“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.”
READ MORE: Greggs chief to quit high street bakery giant
He added: “80% of Greggs’ range is manufactured in-house, providing some flexibility in how the group navigates inflationary pressure. However, Greggs will still face intense cost headwinds.
“Our experts expect Greggs’ EBIT margin to continue to be under pressure over the months to come, given input costs and how delivery is taking a bigger share of sales.
“Menu reduction and loyalty schemes are the two lasting good to go trends from the pandemic and our experts do not see that changing.”
In March the business warned changes to taxes and higher costs for energy, food and staff would push up its costs between 6% and 7%.
Prices it charges customers already went up in the early part of 2022 and the firm said in March that it expects more changes this year.
In the first 19 weeks Greggs opened 49 new shops, including 18 with franchise partners. Recent shop openings include a number of retail parks and also airports. In the year to date it has closed six shops, leaving a total of 2,224 shops trading at May 14, comprising 1,831 company-managed shops and 393 franchised units.
It said expectations for the financial year are unchanged.
Greggs shares were trading down 2.8% early on Monday but closed down 0.46%, or 10p, at 2,160p.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here