Greggs rules out price rises after sales slow

Britain’s biggest bakery chain, Greggs, has ruled out any more price rises this year as it reported a slowdown in sales in its third quarter.
Roisin Currie, chief executive, said the high street purveyor of sandwiches and baked goods had “no plans to put up prices for this year”, with costs cooling more quickly than expected.
Cost inflation, largely led by wage increases, had previously forced Greggs to put up prices. It raised prices for some items in July, including adding 5p to the cost of a sausage roll.
Currie said that further price rises could depend on increases in the statutory minimum wage next year. It expects the level of cost inflation for 2024 to be towards the lower end of its 4 to 5 per cent range.
Despite easing inflation, the FTSE 250 retailer reported a slowdown in sales over the summer, sending shares down 4.2 per cent, or 132p, to £29.92. The stock has risen by more than a fifth in the past year.
Currie said sales in July and August had been dampened by wet weather and the summer riots which swept across several towns and cities.
Like-for-like sales grew 5 per cent in the third quarter, slower than 7.4 per cent in the first half. Sales are up by 6.5 per cent in the year to date.
“July and August were slightly softer for a mix of reasons,” Currie said. “We had some damp weather, the riots we had to contend with and also general uncertainty in the economy which was a factor of the election and the new government.”
She added that a small number of company stores had been damaged in the riots but reopened quickly afterwards.
Trading last month was much better, she said, as people returned to work after the summer holidays.
Currie added that future trading looked set to pick up further with the launch of its autumn menu, which includes a pumpkin spice latte and salted caramel latte in its seasonal drinks range, and a newly introduced pumpkin spice doughnut. The company is also on track to extend its over-ice drinks range from 800 to a total of 1,000 shops by the end of the year.
Greggs, founded in 1939 on Tyneside by John Gregg, recently reached a milestone of 2,559 shops trading nationwide and is expected to have opened between 140 and 160 net new shops this year, including around 50 relocations and 55 net openings with franchise partners.
The business is aiming to have more outlets in supermarkets, petrol stations and travel locations. It also expanded its delivery service with a second partner, Uber Eats, after a successful trial with Just Eat.
The London-listed company has managed to reel in cash-strapped customers with its cheaper goods while others in the hospitality sector have struggled. It claimed this year that it had dethroned McDonald’s to become Britain’s most popular breakfast spot.
Analysts at Barclays said there “may be some focus on slower like-for-like sales in the third quarter versus the first half, but the recovery in September should help to allay investor concerns”.
They added that the full-year outlook was unchanged, “so Greggs is on track for another year with more 10 per cent profit before tax growth”.
Peel Hunt analysts said: “We maintain our thesis that Greggs is a solid operator, but with an increasingly promotional fast-food environment, cost headwinds, and a store estate nearing capacity.”
Investec, which has a “buy” rating for Greggs, said it continued to see its forecasts and valuation “underpinned by an attractive long-term growth story.”