Greggs lifts full-year expectations, shares surge

Bakery chain Greggs said on Tuesday that the full-year outcome was set to be ahead of its previous expectations following a strong sales performance in the third quarter, but also warned over inflationary pressures.

The company, known for its sausage rolls, said two-year like-for-like sales were up 3.5% in the third quarter despite staffing and supply chain disruption. Growth was particularly strong in August thanks to the 'staycation' effect, and remained positive in September, with two-year LFL growth of 3% in the four weeks to 2 October.

Delivery sales have continued to develop well, it said, with 943 shops now supplying customers through this channel.

Greggs said the broadening of its vegan-friendly options has been well received, in particular the limited edition 'Vegan Sausage, Bean & Cheeze Melt', the 'Vegan Ham & Cheeze Baguette' and a vegan-friendly breakfast sausage.

Still, the company also warned it has not been immune to staffing and supply chain pressures and said there has been some disruption to the availability of labour and supply of ingredients and products in recent months.

"Food input inflation pressures are also increasing; whilst we have short-term protection as a result of our forward buying positions we expect costs to increase towards the end of 2021 and into 2022," it said.

"Operational cost control has been good and the strong sales performance in the third quarter gives us confidence as we move into the autumn. Subject to any unexpected Covid disruption we expect the full year outcome to be ahead of our previous expectations."

Greggs also said on Tuesday that it was lifting its new store target to around 150 a year from 2022, from 100 currently. It also announced an "ambitious" target to double turnover over next five years to around £2.4bn in 2026.

At 1200 BST, the shares were up 10% at 3,162.00p.

Richard Hunter, head of markets at Interactive Investor, said: "Greggs’ no-nonsense, value approach has succeeded where others have struggled, despite broader pressures outside of its control.

"Even with this currently strong performance, the company is not resting on its laurels. An ambitious capital expenditure programme out to 2026 will peak in 2024, as Greggs targets 150 new store openings per year from 2022, with 100 expected this year. Equally, the online and delivery channels will also be receiving attention, while extended evening openings should also bring benefits.

"Strategically, the company’s imaginative marketing ploys have also been successful, particularly the more recent vegan-friendly food and drink ranges, with themed offerings such as Halloween to follow. Greggs will also be outlining its plans for new stores at an upcoming Capital Markets Day, offering the fact in advance that pre-pandemic company-managed stores returned 42% on capital and franchised stores 33%."