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Greggs warns of rising costs, labour shortages and supply chain woes

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·2-min read
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Greggs warns of rising costs, labour shortages and supply chain woes. Photo: Dinendra Haria/SOPA Images/LightRocket via Getty
Greggs said it had 'confidence' moving into autumn despite pressures on staffing and supply chains. Photo: Dinendra Haria/SOPA Images/LightRocket via Getty

Greggs (GRG.L) stock headed 4.3% higher in early trade on Tuesday as investors digested news that it expects to exceed its previous full-year expectations. 

The news comes despite pressures on staffing and supply chains. The high street staple said it had "confidence" moving into autumn.

The FTSE 250 company said availability of labour and supply of ingredients had caused issues, alongside price increases. "We expect costs to increase towards the end of 2021 and into 2022," it said. 

Two-year like-for-like Q3 sales were up 3.5%. 

Watch: Boris Johnson addresses UK's supply chain issues

The update also contained further details on its bullish expansion plans, with the "potential" for at least 3,000 UK shops and a net shop growth per year of 150 from 2022. 

"The shape of the new shop pipeline reflects opportunities that have been successful for us in recent years as we reposition the estate towards on-the-go locations," it said.

Greggs stock headed higher on Tuesday morning in London. Chart: Yahoo Finance UK
Greggs stock headed higher on Tuesday morning in London. Chart: Yahoo Finance UK

"The overall UK food-to-go market remains depressed by around 15% to 20% as the UK's new found appetite for working at home keeps commuter volumes in check," said Ross Hindle, analyst at Third Bridge.

"Greggs has been able to punch above its weight in this climate because of its low pricing, wide-appeal marketing, and shops outside city centres."

Following the update, Shore Capital changed its previous SELL recommendation to UNDER REVIEW. 

Greggs isn't the only chain to feel the pinch of supply chain issues, which are being felt across the sector. The Road Haulage Association (RHA) reported earlier this year that there is a shortage of 100,000 drivers and warned the situation has reached a “crisis point” with critical supply chains failing.

Read more: Why is the UK facing a HGV driver shortage and what could it mean for consumers?

It said that many drivers have gone back to their home countries either due to uncertainty over new Brexit rules, or because of the UK’s COVID-related lockdown restrictions. Many have not returned.

On top of this, HGV (heavy goods vehicle) drivers are made up of an ageing population that is retiring; and there is a major backlog of tests needed to be taken before drivers can qualify to operate lorries, because the tests were put on hold during the pandemic.

Watch: What is inflation and why is it important?

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