Greggs sales jump as cash-strapped customers turn to cheaper meals

Greggs has reported a jump in sales as the rising cost of living makes consumers look for cheap products.

The North East bakery giant saw sales jump in the first half of the year, but warned its cost inflation could hit 9%.

Sales leapt by 27.1% in the 26 weeks up to 2 July 2022, equating to a total of £694.5 million. That is compared with £546.2 million a year earlier.

According to the company, people are more likely to turn to lower-cost food and drink on the go as soaring inflation puts a strain on people’s incomes.

Despite the increase in sales, half-year profits remained roughly the same, year-on-year, at just over £55 million.

This is thought to be down to the reintroduction of business rates, an increase in VAT and higher levels of cost inflation.

Greggs has cautioned this could reach around 9% this year as it is hit with higher prices of food, packing and energy.

In May, the company said customers would see 5p or 10p increases on some items as it was forced to raise prices for the second time this year.

Greggs chief executive Roisin Currie told PA news agency that it had however fixed prices with suppliers for roughly the next five months. This means the cost of its food and drink should not rise further during that time.

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.”

Greggs currently has more than 2,200 shops in the UK and according to Ms Currie is hoping to capitalise on evening business.

The company aims to do this by extending its opening hours and changing its menu options as well as offering more delivery services.

By the end of the year Greggs intends to have 500 shops open until 8pm to target more customers wanting hot food in the evening.

More than 1,000 of Greggs' shops deliver to customers through delivery app Just Eat with the average customer spending around £10 on deliveries. Ms Currie claims that is roughly three times higher than customers would spend in the shop.

The chief executive also said that menu changes are “critical” for the chain and it is currently trialling new products.

These include jacket potatoes, and dessert options like hot yum yums with salted caramel sauce and brownies with chocolate dipping sauce.

Despite looking positive, experts warned the uncertainty surrounding rises in costs could have a greater impact on the chain than anticipated.

Charlie Huggins, head of equities at Wealth Club, said: “The cost of raw materials, energy and wages are all rising rapidly. Greggs is significantly exposed to all three, putting pressure on profits.

“There’s a limit to how far it can raise prices to offset these extra costs."

He continued: “If Greggs can maintain its recent sales momentum, it will go some way to offsetting inflationary pressures.

“But the group’s near-term prospects still look rather unappetising given the extremely unsavoury cost outlook.”

Greggs’ financial results coincide with the company announcing the appointment of Matthew Davies as its incoming chairman.

He will take over from Ian Durant on November 1.

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