Greggs, the leading UK food-on-the-go retailer, has announced its half year results today.
Like-for-like sales rose by 16% with underlying profit before tax up 14.2%. No change to inflation outlook – costs still seen rising by c. 9% this year.
Despite economic uncertainty, full year expectations are unchanged.
Charlie Huggins, Manager of the Quality Shares Portfolio at Wealth Club, commented: “This is another solid performance from Greggs in a challenging economic environment, with little sign so far of consumers cutting back on sausage rolls and pasties.
Greggs is benefitting from doing the simple things well. It has a brand that resonates with consumers, and it augments that with sensible investments in stores, new ranges, supply chain and infrastructure.
Some of the strong sales growth is explained by lapping the impact of Omnicron in the first nine weeks of last year. But the group has also successfully expanded its evening trade, and this has made a strong contribution.
Importantly, cost inflation now appears to have peaked. Like-for-like cost inflation is seen falling from 11% in the first half to around 7% in the second. This should reduce the need for price increases and help Greggs to convert more of its sales to profit heading into 2024.
Greggs isn’t out of the woods just yet. Cost inflation may have eased but it remains unsavoury. Meanwhile, pressure on the UK consumer could build into the second half as the impact of higher interest rates starts to bite. But Greggs is in a far better position than most retailers and is more than holding its own. Should inflation continue to moderate, the business could really be in a sweet spot.”