Greggs Reading store

Greggs shares stumbled after it released the results on Tuesday morning, closing down 2.3% for the day at 2,686p

It was mixed picture for Greggs this week as the high street bakery chain revealed a 23% jump in 2022 revenues to £1.5bn but a mere 1.9% increase in pre-tax profits to £148.3m as soaring inflation ate into the bottom line.

The group highlighted cost inflation of 9% across the business as a whole in 2022 and said it would remain stubbornly high in the range of 9-10% in 2023.

CEO Roisin Currie added: “Cost inflation will continue to be a challenge, driven particularly by pay awards and energy costs, but we are confident that our value proposition will remain compelling as customers look to make their money go further.”

Sales were lifted by a combination of price hikes, modest volume increases and record store openings, with 186 new sites in the year taking the portfolio to 2,328 strong. The business added there was a “clear opportunity” to operate more than 3,000 shops across the UK.

Greggs is also planning to push its opening hours later, with 500 shops now open until 8pm or beyond, with the business highlighting post-4pm as its strongest growing daypart, while plans are in place to trial a 24-hour drive-thru outlet.

Like-for-like sales in company-managed shops increased 18.8% in the first nine weeks of 2023, in line with expectations as price hikes annualised and it lapped numbers depressed by the Covid Omicron variant.

Shares in Greggs stumbled after it released the results on Tuesday morning, closing down 2.3% for the day at 2,686p.

However, the stock has benefitted from optimism in the market this year, rising 12.7% so far in 2023.

AJ Bell investment director Russ Mould said Greggs was “perfectly pitched” in the current value-focused environment.

“With the best will in the world, and even when household budgets are under real pressure, sometimes people are just too busy to make sandwiches,” he added. “Cheap, hot, filling food is just what people are looking for and as the company continues to roll out new stores, there are a growing number of outlets where people can snap up these products.”

Mould applauded the ambition to get to 3,000 shops but warned the group needed to be careful “not tip over into hubris”.

“Will the brand still be as popular when economic conditions have improved, and people have a bit more money in their pocket?

“However, the company’s record over a long period provides confidence they know what they’re doing, and Greggs can lay claim to being one of Britain’s best-run businesses.”