Greggs has warned that the price of its products is likely to go up for the second time this year as it faces runaway increases in costs.
The fast food chain said it had already increased some prices at the start of the year, and that further changes are expected.
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.
It said it will try to protect its reputation for being “outstanding value for money”.
We will work to mitigate the impact of this on customers, protecting Greggs' reputation for exceptional value in the freshly-prepared food-to-go market
“This has necessitated some price increases, which were made at the start of this year, and further changes are expected to be necessary,” Greggs said.
“As ever, we will work to mitigate the impact of this on customers, protecting Greggs’ reputation for exceptional value in the freshly-prepared food-to-go market.
“Given this dynamic, we do not currently expect material profit progression in the year ahead.”
However, boss Roger Whiteside said the company will have to assess whether it is able to change prices before it does.
It comes down to ensuring that customers will still choose to spend money at Greggs even if prices go up.
“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,” he said.
“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,” he added.
“You’re trying to position price to make sure you maximise sales.”
The business swung back to a profit last year after taking a hit in 2020 when many of its shops were closed for much of the year due to the pandemic.
The chain notched up a £145.6 million profit before tax, from a loss of £13.7 million the year before.
Sales rose 5.3% compared with 2019, the year before the pandemic, reaching £1.2 billion.
Greggs plans to extend late opening times to 500 shops around the country, and will start offering delivery from 1,300 of its stores. Delivery is currently available from 1,000 sites.
Mr Whiteside said the business needs to establish a reputation of being open late before it can realise the full benefits of keeping its doors open until 8pm, rather than the usual 6pm.
With the wow factor of its vegan offerings now a distant memory, Greggs needs to provide more innovative and broad meal and drink choices
Ross Hindle, an analyst at Third Bridge, said: “Overall, the UK food-to-go market remains depressed, with commuter footfall stubbornly below pre-Covid levels.
“Despite difficult trading conditions, Greggs has been able to punch above its weight thanks to a recipe of competitive pricing, clever location strategy, and their JustEat delivery partnership.
“In 2021 Greggs drove revenue growth through store expansions, opening some 131 new shops.
“More shops may have meant more sausage roll sales, but a lack of like-for-like growth is now a concern.
“With the wow factor of its vegan offerings now a distant memory, Greggs needs to provide more innovative and broad meal and drink choices, our experts say.”
Staff will also be able to expect a bonus as Greggs shares 10% of its profits 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, Mr Whiteside said.
He added that the business has no direct exposure to the war in Ukraine but that it will be impacted by global price rises which are expected from the Russian invasion.
Russia and Ukraine supply around a third of the world’s wheat exports, and Ukraine is also a major supplier of sunflower oil.
