Greggs surges as it serves up better-than-expected sales

Bakery chain Greggs surged on Tuesday after it said sales in the third 13 weeks to October were slightly better than it had expected, adding that full-year results will likely be ahead of previous guidance.

Greggs said like-for-like sales in the period grew by 4.9%, while total sales were up 5%.

It said product initiatives across the day combined with great value deals continue to drive increased customer visits and transaction values.

In addition, the company said it has recently acquired a freehold distribution depot adjacent to its existing bakery in Enfield, as it looks to extend its distribution network, particularly in the south-east of England where its existing capacity is most constrained.

The total investment, including conversion works, is likely to be around £13m and Greggs said it expects the facility will be brought into use in the second half of next year.

Looking ahead, the company said market conditions remain favourable with low cost pressures and a stronger consumer environment.

It expects this to continue through to the end of the year after which increases to wage rates will drive greater inflationary pressure.

The company pointed out that its standard rate for hourly-paid shop staff is already above the National Minimum Wage and said it will maintain a competitive position in the market going forward.

“Our sales performance is slightly ahead of our previous plan and, whilst comparatives will stiffen further in the fourth quarter, sales will benefit from additional shop openings. As a result we expect to deliver good growth for the year, slightly ahead of our previous expectations, and further progress against our strategic plan.”

Shore Capital, which rates the stock at ‘buy’, said: “In a period when comparatives toughened and the group annualised new trading initiatives that accelerated growth in H2 2014, Greggs has again outperformed expectations.”

It added that the in-store initiatives, product innovation, refit programme and cost saving initiatives will provide ongoing momentum to the Greggs story.

At 1415 BST, Greggs shares were up 8.7% at 1,170p.