Cost inflation concerns as Greggs sales hit £894m

Newcastle-based bakery and “food-on-the-go” retailer Greggs said its 2016 sales rose 7% to £894.2 million and pre-tax profit excluding exceptional items rose 10% to £80.3 million.

However Greggs shares fell 3% after its chief executive warned that UK consumer outlook was “more challenging than we have seen in recent years” with industry-wide pressures emerging in commodities and labour costs.

Greggs shares closed around 980p, giving it a stock market value of just under £1 billion.

Greggs CEO Roger Whiteside said: “In 2016 we delivered another strong performance as we continued on our journey to transform Greggs from a traditional bakery business into a modern, attractive food-on-the-go retailer.

“Our product offer is evolving to meet the changing needs of our customers and our shop estate and service levels have benefited from significant investment.

“The UK consumer outlook is more challenging than we have seen in recent years, with industry-wide pressures emerging in commodities as well as labour costs.

“However we are confident of making further progress as we implement our plan to grow Greggs as a contemporary food-on-the-go brand.”

Dividend per share will rise 8.4% to 31p.

In his outlook for 2017, Whiteside said the year had started in line with expectations, with company-managed shop like-for-like sales in the eight weeks to February 25 up by 2% and total sales up 5.8%.

However he added that the “challenging” UK consumer outlook and pressures emerging in commodities and labour costs are expected to have “a modest impact on margins in the short term.”

Greggs chairman Ian Durant said: “In the short term we face a period of greater economic uncertainty and increased pressure from cost inflation.

“We have highlighted the changes necessary to support the ongoing strategic realignment of the business, including the major investment programme under way to grow our supply chain.

“This will involve some difficult changes for some of our colleagues, as detailed in the chief executive’s report, but is essential to support the long-term competitiveness of the business.”