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Greggs warns of cost pressures

by LLB Reporter
16th May 22 11:21 am

Food on the go firm Greggs must have hoped 2022 would be a positive year marked by the recovery from Covid – with footfall getting back to pre-pandemic levels.

It’s not shaping up that way and it’s notable how the company is only guiding for full year profit to be a bit ahead of the 2021 outturn.

“The problem facing Greggs is like the one facing lots of businesses – for the first time in a generation inflation is a real factor,” said AJ Bell’s Russ Mould.

“The cost of raw materials and staff is going up fast and that’s a particular problem for a value-based proposition like Greggs which has limited scope to pass on these costs to consumers if it is to retain its bargain credentials.

“At least the nature of Greggs’ products should offer some insulation from cost-of-living pressures. Spending just over a quid on a sausage roll is the kind of impulsive purchase which people will probably still engage in without thinking twice, unlike buying a new sofa or a new car.

“And this is a well-run operation with a good track record, with a reliable recipe which new CEO Roisin Currie can stick to.

“Innovation in products, such as the ongoing rollout of vegan products, and expanding in areas like home delivery can help build on these robust foundations.

“That said, Currie does face some pressure from some ambitious growth targets unveiled last year and an attempt to temper this guidance can’t be ruled out as the new boss looks to set a bar that she has a reasonable chance of clearing.”

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