Newcastle-based Greggs said in a trading update that like-for-like (LFL) sales in company-managed shops grew 17.1% in the first 19 weeks of 2023 “in part reflecting the impact of Omicron in the first nine weeks of 2022.”

Total sales in the 19 weeks to May 13, 2023, rose to £609 million from £495 million for the same period of the prior year.

Greggs said: “LFL sales growth in the 10 weeks to 13 May has averaged 15.7% and we expect this figure to continue to normalise as we annualise against the actions taken in 2022 to mitigate against inflation.”

Greggs said menu development continued to support its strategic growth objectives.

“Sales of hot food and snacks including chicken goujons and wedges are showing particularly strong growth,” said the Newcastle firm.

“Pizza is also proving popular, with our Late Trade Pizza Deal driving sales in the evening daypart.

“We have also continued to grow our plant-based offering, with the new Vegan Mexican Chicken-Free Bake being the latest addition to the menu and were delighted that our Sweet Potato Bhaji and Rice salad bowl recently won the Healthy Eating award at The Sammies 2023.”

During the period, Greggs opened 63 new shops, including 25 with its franchise partners.

Recent shop openings have included sites at Canary Wharf Station in London and at Glasgow and Cardiff airports.

“The pipeline for the remainder of the year is strong,” said Greggs.

“In the year to date we have closed 26 shops, giving a total of 2,365 shops trading at 14 May (comprising 1,908 company-managed shops and 457 franchised units).

“In line with our previously-communicated capital expenditure plans, investment projects at our Birmingham and Amesbury distribution centres are under way and will deliver additional logistics capacity to support further expansion of our shop estate.

“We anticipate that this additional capacity will become available in the second half of 2024.”

In its outlook, Greggs said: “We have made a good start to the year with sales in line with plans and continued progress on our strategic initiatives.

“Looking ahead, whilst we expect the macro backdrop to continue to be challenging, we are confident in making further progress.

“Although we expect to see ongoing material cost inflation, we have good forward cover on key commodities.

“Consumer disposable incomes are likely to stay under pressure, but we remain confident that our outstanding value proposition continues to be compelling.

“Whilst uncertainties continue, the board’s expectations for the full year outcome are unchanged.”

REACTION:

Charlie Huggins, Manager of the Quality Shares Portfolio at Wealth Club: “This is a solid performance from Greggs in a challenging economic environment, with little sign so far of consumers cutting back on sausage rolls and pasties.

“The cost of raw materials, energy and wages are all rising rapidly and Greggs is significantly exposed to all three.

“However, at least inflation appears to have stabilised and isn’t getting worse. And crucially, sales are rising strongly, which is providing oxygen to help absorb cost pressures.

“Some of that sales growth is explained by lapping the impact of Omnicron in the first nine weeks of last year. Even so, there is no doubt Greggs’ brand is resonating strongly with the UK consumer and is in fine fettle.

“Inflationary pressures will continue to bite in the rest of the year, holding back profits.

“However, Greggs is in a far better position than most retailers to weather the storm, and is more than holding its own. Should inflation start to moderate, the business looks well primed to return to profit growth.”

Victoria Scholar, Head of Investment, Interactive Investor: “Gregg’s value proposition is holding up amid the backdrop of a softening consumer with strong demand for hot food and its growing plant-based offering after the success of its vegan sausage roll. However weaker disposable income and higher costs continue to be challenges for the bakery.

“Shares in Greggs are trading flat today but are up more than 18% year-to-date, sharply outperforming the wider market thanks to its resilient low price point offering.”