Britain's Greggs said it expected demand for its value baked goods to continue this year with new products like chicken goujons providing an additional boost, putting it on track to meet growth forecasts despite pressure on consumers.
Greggs is expected to grow profit by about 10% this year even though household budgets across the country are shrinking, but it says its value offering, along with new products including its Vegan Mexican Chicken-Free Bake will keep sales growing.
For the 10 weeks to May 13, Greggs said underlying sales climbed 15.7%, a rate it expects to normalise over the year.
Read More: British Baker Greggs Warns Of Ongoing Inflation Challenge
Cost Inflation Expectations
High inflation in Britain, where the bakery and fast food chain operates from 2,300 outlets, has impacted the company over the last year, but it said there was no change in its cost inflation expectations.
Last year, profit was held back by rises in the prices of ingredients, energy and labour. Greggs has previously said it expects cost inflation to be between 9% and10% this year.
'Although we expect to see ongoing material cost inflation, we have good forward cover on key commodities,' the company said. 'Consumer disposable incomes are likely to stay under pressure, but we remain confident that our outstanding value proposition continues to be compelling.'
Analysts are expecting Greggs to report pretax profit of about £163 million (€187.1 million) for 2023 according to Refinitiv data.
Analyst Viewpoint
Commenting on the business' performance, analyst Wayne Brown of Liberum said, "Greggs has traded strongly the first 19 weeks of the year with LFL sales up 17%. This in part reflects the COVID impacted comparative and price rises to help offset inflation. LFL’s should start to normalise as we move through the year. We are encouraged that the menu expansion continues to drive sales in evening dayparts and this remains a huge opportunity.
"However the shares have been strong rising c.30% the past six months. This is wholly deserved but means Greggs is now trading on an international QSR multiple and suggests to us that the shares are up withe events and upgrades are required to drive the shares higher in our humble opinion."
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