Soaring sales at Newcastle bakery chain Greggs have not translated into growing profits as the company was hit by inflation and other cost pressures.
The company has issued interim half-year results in which total sales rose 27.1% and were 12.3% above the same pre-pandemic period. But half-year profits remained largely flat year-on-year at £55.8m, because of the re-introduction of business rates, an increase in VAT and higher levels of cost inflation.
With soaring inflation putting a strain on people’s incomes, consumers are more likely to turn to lower-cost food and drink while on the go, Greggs said.
Read more: Greggs teams up with Primark for second fashion collection
New Greggs CEO Roisin Currie said: “Greggs delivered an encouraging performance in the first half of the year with sales ahead of 2019 levels. These results demonstrate the continued strength of the Greggs brand and demand for our great tasting, quality and value for money offering.
“During the period we continued to make good progress with our strategic priorities, including expanding our shop estate and making Greggs more accessible to customers through extended trading hours and digital channels.
“In a market where consumer incomes are under pressure Greggs offers exceptional value for customers looking for food and drink on-the-go. 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. We remain confident in Greggs’ ability to deliver continued success.”
In the results, Greggs said it had seen sales of £694.5m in the first half of the year, though footfall in its stores was still below pre-pandemic levels. Pre-tax profit was £55.8m, only a slight rise on the £55.5m seen last year. It said its costs were increasing at around 9%, with increased prices in ingredients, packaging and energy.
In May the company made 5p or 10p increases on some items, but Ms Currie said the firm hasn’t decided on making more increases, instead saying Greggs will be monitoring the situation in the coming weeks.
She said: “We know the economic environment is challenging and it is tough out there for our customers, so we are doing everything we can to protect our price proposition. We are not immune to cost inflation but we are trying hard to mitigate against it impacting customers.”
Despite inflationary pressures, the company said there was a “clear opportunity” to grow to 3,000 shops around the UK and it was targeting areas such as retail parks, railway stations, airports, supermarkets and central London.
It added that it was increasing its healthy food choices with the launch of two salad meal boxes and was also adding two new pizza flavours. Customers can also now customise their pizza toppings when ordering through its digital channels and it intends to trial the customisation of sandwich fillings and baguettes in the second half of 2022.
Greggs recently announced a second collaboration with Primark that will see a new fashion collection go on sale this week, with expectations high that it will sell out thanks to its cult following.
Ms Currie praised the firm’s marketing team for its hard work to help make Greggs an “iconic”, much-loved brand.
She said: “We sometimes talk about our secret sauce as a business. We have set ourselves out to be the customer’s favourite for food -on-the-go, so as a team a decade of hard work has gone into making us one of those British iconic brands that our customers love, but we never take that for granted.
“Our teams do extremely well to link up with other brands. We talk about how we punch above our weight in terms of our messaging to customers, and that’s something we need to continue to do more of. We have an amazing culture that has been built upon for a decade, doing the right thing and treating people well.
“When we look at some of the collaborations we have done we don’t take ourselves too seriously. We are a bit tongue-in-cheek, we have a bit of fun.
“The marketing team also work very hard on our customers insights, really trying to make sure that we understand what customers are looking for and how we make sure they get those right messages.”
Greggs also announced that it had appointed former Tesco CEO Matt Davies as an independent non-executive director and that he would succeed Ian Durant as chair of the board in November.
READ NEXT:
* Action needed to address regional inequalities
* Greggs makes progress on 10-point plan to make the world a better place
