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Greggs warns of price hikes as cost pressures rise

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·3-min read
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Greggs expects more price changes this year as customers face a cost of living squeeze that could force them to cut spending. Photo: Dinendra Haria/SOPA Images/LightRocket via Getty Images
Greggs expects more price changes this year as customers face a cost of living squeeze that could force them to cut spending. Photo: Dinendra Haria/SOPA Images/LightRocket via Getty

The boss of Greggs (GRG.L) has warned prices could rise as sales in big cities lag the rest of its estate while cost pressures increase as customer incomes come under pressure amid soaring inflation.

Chief executive Roger Whiteside said the bakery chain was in "uncharted territory" as supply constraints, the Ukraine war and the sluggish post-pandemic recovery of consumer demand push up costs.

"We see ourselves as value leaders in the food-to-go market, and that market has been forced to put prices up, we are no different," Whiteside said. "But we make sure that the gap between us and our competitors never narrows so that we are always the best value."

He said that prices in its stores will depend on "price elasticity", how much demand is affected by cost, adding "some prices might move up 10%, other prices won’t move up at all".

In a trading update to shareholders on Monday, Greggs reported a rise in first quarter sales that was flattered by comparison with restricted trading conditions due to COVID-19 in the same period of 2021.

Read more: Ofgem plans quarterly review of energy price cap to prevent unfair higher bills

Greggs warned "market-wide cost pressures" have been increasing, including rising energy costs and raw ingredients such as wheat and oil.

"We will continue to work to mitigate the impact of cost pressures whilst protecting Greggs’ reputation for exceptional value," it said.

The chain, known for its cheap pasties, vegan snacks, sausage rolls and sweet treats did not make an official announcement on whether it plans to hike prices in its stores.

In March, the chain warned that changes to taxes and higher costs for energy, food and workers would push up its costs between 6% and 7%.

Greggs' prices had already gone up in the early part of 2022, and the firm said it expects more changes this year as customers face a cost of living squeeze that could cause them to reign in spending.

Shares in the Newcastle-based group fell as much as 3% in early trade on Monday morning in London, extending its decline for the year to 36%. Shares were up 0.4% at the time of writing.

Sales in larger cities and office locations continued to track behind the rest of its estate. However, transport locations, such as train stations, have shown a marked improvement in activity in recent weeks.

The fast food retailer said like-for-like sales rose by more than 27% in the 19 weeks to 14 May. Total sales during the period were up to 30% to £495m ($606m), compared with the same time last year.

Hot food and snack sales performed particularly strongly in the period, Greggs reported, with chicken goujons and potato wedges proving popular.

The company said its expectations for the full year were unchanged.

It also announced that it had opened 49 new shops, mostly in retail parks, as well as new stores in Birmingham and Liverpool airports.

Watch: How does inflation affect interest rates?

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