Greggs said that input cost inflation has “cooled” but still continues to affect profit margins. The food-to go retailer reported an increase in sales for the first half of the year, driven by new openings at retail parks and travel hubs.
Roisin currie, Greggs CEO, stated that the bakery chain benefited from “a softening” of food and energy prices, but was still hit by “significant inflation” due to rising labour costs. The group’s inflation is expected to fall from 11% in the first half to 7% in the second.
Greggs’ total sales rose 16 percent on a comparable basis in the six-month period ending at the beginning of July compared to the same period the previous year. Despite showing signs of abating the profit margins were down 0.5 percentage point to 7.5% compared with last. Pre-tax profits rose from £55.8mn up to £80mn.
Early afternoon trading saw shares of the London-listed company down 5.1% to £26.20.
Ben Hunt, a retail analysts at Investec said that there was “nothing wrong” with Greggs’ results for the half-year period. He suggested instead, it could be due to investors expecting a further improvement in trading expectations.
Hunt said that the momentum had continued, and margins were likely to recover quickly as inflation continued to decline. Greggs opened 94 new stores in the first six months of this year. These were mainly in airports, railway stations, and retail parks.
Currie stated that Greggs affordable menu is attracting new customers. Greggs increased the price of some products by 5p-10p in June. The bakery chain raised prices three times last year.
Currie said that “consumer disposable income remains under pressure. We need to remain the market leader in terms of price and continue to offer fantastic value deals.” “[Inflation] has cooled from its previous level. . . “Although the number of cases has decreased over the last 12 months, if you compare it to previous levels, they are still high.”
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