Prepared food group Greencore posted a huge jump in sales and profits this week as the food-to-go market roared back from Covid lows, but its shares soon plunged amid concerns over tightening consumer spend.

Total reported group revenues for the year to 30 September increased by 31.3% to £1.74bn, driven by increased volumes and double-digit percentage hikes in underlying pricing. Greencore said it benefited from a “resilient” UK trading environment, despite some demand volatility caused by Covid restrictions early in the year.

Pro forma sales in food-to-go categories increased by 35.2% year on year, driven by a combination of strong underlying volume growth, contribution from new business wins and increased pricing as it recovered inflation.

Underlying revenues in other convenience categories increased by 19.2%, driven by increased underlying pricing and higher revenue in the group’s Irish ingredients trading business.

The topline growth fed into stronger bottom line figures. Adjusted operating profit shot up from £39m to £72.2m, while adjusted operating margin was up by 130bps to 4.2%.

However, the tone of its outlook was notably more cautious than October’s guidance. Despite demand having “broadly held up”, Greencore noted an effect on category sales mix.

Greencore’s comments referenced early signs of shifting customer behaviour in UK retail, explained house broker Shore Capital. Customers are purchasing less high-value, high-margin items like sushi, and sales are up in lower-margin areas like private-label ambient sauces, it said.

Despite improved profitability, adjusted operating profits remain well below pre-Covid levels. EBIT in the second half was still 10% below 2019 levels, with margin substantially down.

Greencore also warned of likelihood of further “substantial inflation” this year, as it continues to prioritise recovery and mitigation.

Broker Peel Hunt noted cost inflation last year was mid-teens and was expected to be over 10% again in the coming year. “Getting further price increases has become more challenging outside price pass-through contracts,” it said. “There are clearly some customers resisting the increases required and Greencore may step away from these uneconomic contracts.”

Peel Hunt, in particular, points to the number of foodservice supply contracts it picked up from the collapse of Adelie, which could be reviewed as part of this focus on profitable contracts.

Greencore shares fell 8.4% on Tuesday back to 65.2p and are down more than 50% so far in 2022.