Yahoo Finance Greggs warns prices could rise for the second time this year
Bakery chain Greggs (GRG.L) has warned that its prices are likely to go up for the second time this year as rising costs for energy and ingredients bite into profits.
The cost of doing business is expected to rise between 6% and 7% for the company this year due to higher staffing and ingredient costs.
The fast food chain said it had already increased some prices at the start of the year, and that further changes are expected.
It raised prices widely by up to 10p in January to reflect its growing costs.
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Greggs said it will try to protect its reputation for being “outstanding value for money”.
CEO Roger Whiteside said: “We’ve got no plans to raise prices currently, but obviously that’s going to have to remain under review given the way the markets are moving around the world on commodity food prices in particular.
“If the market allows price increases to move onto customers, then we will have to attempt to do that, if it doesn’t then we won’t be able to.”
“You’re trying to position price to make sure you maximise sales.”
The company reported pre-tax profits of £145.6m ($190.9m) for the year to 1 January. That compared to a 2020 loss of almost £14m.
Greggs said that plans to open 150 net new stores this year were on track despite the challenges.
While total sales were 5.3% higher on their 2019 level at £1.2bn, like-for-like sales in its managed shops were still more than 3% down on the pre-pandemic year.
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Mamta Valechha, equity analyst at Quilter Cheviot, said: “Greggs has flagged that cost pressures are currently more significant than initial expectations.
"We believe costs are largely related to food related costs (29% of total costs) although we note Greggs still has five months of forward cover so has plenty of time to react to the latest step-up and has already been increasing prices.
“Energy related costs (4% of cost base) are more so manageable with nine months of cover in place.”
Greggs said that it planned to pay a final dividend of 42p per share as well as a special dividend of 40p per share.
The bakery company also intends to share a £16.6m profit windfall with employees. For staff who have been with the business for over six years and work 20 hours a week, the bonus will work out at around £800, Whiteside said.
