Greggs warns cost headwinds will hit profit growth

High street baker Greggs said significant inflationary headwinds would hit profit growth this year as it faced higher costs for raw materials, energy and labour.

The chain, famous for its sausage rolls, swung to a pre-tax profit of £145.6m in the 12 months to January 1, compared with a £13.7m loss last year and £108.3m profit in 2019. Revenue rose to £1.22bn from £813m in the previous year and £1.16bn in 2019.

"We have started 2022 well, helped by the easing of (Covid) restrictions. Cost pressures are currently more significant than our initial expectations and, as ever, we will work to mitigate the impact of this on customers, however given this dynamic we do not currently expect material profit progression in the year ahead," said chief executive Roger Whiteside.

A final dividend of 42p-a-share was declared for a total of 57p, along with a special 40p-a-share dividend. There was no payout in 2020.

In first nine weeks of 2022, like-for-like sales in company-managed shops rose 3.7% compared to 2020 and 44.2% against lockdown-affected period in 2021.

Greggs said the improved performance and trading outlook for its shops resulted in the net reversal of £2.2m of shop asset impairment charges. A further £1.3m set aside for land and bakery plant & machinery was also released.

The impact of inflation in employment and other input costs is expected to result in a cost inflation headwind of around 6-7% in 2022, it added.

“A proportion of this is forward-covered but the outlook for many commodity costs remains uncertain. This has necessitated some price increases, which were made at the start of this year, and further changes are expected to be necessary,” the company said.