On a roll: Greggs to maintain profits despite inflationary pressures

 
Helen Cahill
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An employee of Greggs bakery holds a pas
Greggs has been selling more healthy foods (Source: Getty)

Greggs posted a steady trading update this morning, saying that it is on track to deliver its expected profits for the year despite inflationary pressures.

The figures

Greggs' total sales were up 7.5 per cent for the first 19 weeks of the year, with like-for-like sales up 3.6 per cent.

Read more: Greggs mulling job cuts despite profit and sales growth

The business opened 42 stores, and closed 14, bringing its total number of stores to 1,792 as of 13 May. Of these, 177 are franchised shops.

At time of writing, Greggs' share price was up 0.4 per cent at 1,075p.

Why it's interesting

Greggs said today that rising input costs will limit its profit growth for the first half of the year ahead, but that for the year as a whole, it expects to perform in line with analysts' expectations. Costs for retailers are rising across the board due to the devaluation of sterling, and rising labour costs from the national living wage.

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The pastry chain also gave investors an update on its shops and investment programme today, saying that it has refurbished 87 stores. Greggs has also been investing in new technology for its ordering system, similar to upgrades that have taken place at Morrisons, and said the new system was popular with staff.

Alistair Davies, analyst at Investec, said: "System benefits are starting to contribute to growth, in our view highlighting some of Greggs' long-term self-help opportunities."

What Greggs said

In a statement, Greggs said: "We have made a good start to 2017 although the sales outlook remains uncertain in the context of slowing growth in disposable incomes.

"Input cost inflation is having a modest impact on margins in the first half of the year as expected, however we have increasing visibility of costs for the second half and anticipate this pressure to ease towards the end of the year."

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