Greggs has said higher wage and energy bills are weighing on its profits but it plans to push ahead with opening 150 new stores this year as well as trialling a 24-hour drive-through outlet.
Britain’s biggest bakery chain, known for its sausage rolls and steak bakes, said costs had risen by 9% last year and would continue to be a challenge in the year ahead.
Greggs expects cost inflation of between 9% and 10% in 2023, despite the Bank of England’s prediction that inflation across the UK will fall quickly this year.
“There are many moving parts this year in inflation, as there was last year,” Greggs’ chief executive, Roisin Currie, told journalists. “We think that potentially it will reduce towards the end of the year, but the best we can do just now is present what we currently see.”
Greggs’ sales jumped 23% last year, taking them above £1.5bn for the first time, while pre-tax profit rose by just 1.9% to £148m.
Earnings were held back by the rising cost of food ingredients such as wheat, energy, and labour, which prompted Greggs to raise its prices earlier than planned.
Food and packaging costs have risen sharply since Russia’s invasion of Ukraine in late February 2022 led to a spike in commodity prices.
The baker increased the price of its top-seller, its sausage roll, by 5p in January to £1.20, marking an increase of 20p from a year earlier.
Currie said there were no current plans to increase the price of sausage rolls or other products, but said the company was constantly monitoring its prices and how they compared with competitors.
The company said staffing costs, including higher wages, made the largest contribution to its costs in 2022, accounting for more than a third (37%) of its underlying cost base, followed by the cost of food and packaging.
It is also sharing £16.6m of its profit with employees, representing more than 10% of its 2022 profit, with each staff member to receive an average bonus payment of £700 in March.
Government support to businesses to help with rising energy prices will be cut from the end of March. Greggs said it had “passed on necessary price increases in response to cost inflation”.
The group opened 147 new shops on a net basis last year, for example in retail parks and central London, as well as Birmingham and Liverpool airports, taking the total to 2,328.
It plans 150 new openings this year and intends to keep opening outlets across the country at this rate for the next few years. Greggs is aiming to reach about 3,000 UK shops within the next five to six years.
Among the new openings this year, Greggs is hoping to create between eight and 10 drive-through locations, open from early in the morning until about 11pm at night.
One of these roadside venues, at an as-yet undisclosed location, will trial operating 24-hours a day, allowing the company to gauge the demand for 3am pastry treats.
In recent times, Greggs has been extending its opening hours, in a bid to attract more commuters and hungry consumers to buy snacks on the way home from work or evening meals. About 500 of its shops are now open until at least 8pm.
It said its chicken goujons and pizzas have been selling well, especially later in the day. Greggs has been expanding its vegan range and what it calls “healthier choices” including rice and salad boxes.
In its home town of Newcastle, Greggs has also been trialling a range of made-to-order hot chicken wraps, and will launch a range of flatbreads, including a chicken shawarma flatbread in the coming months.
