Greggs PLC (LSE:GRG) shares jumped to their highest in over a year after the Tyneside bakery chain reported a sharp rise in first-half profit as new shop openings, grocery sales and tight cost control helped offset subdued consumer confidence.
However, there was also a warning that additional supply-chain capacity is expected to result in second-half profit falling year on year, unless the consumer backdrop improves.
The board's expectations for the full-year outcome remained unchanged, chief executive Roisin Curry said, also highlighting "great progress" in improving supply chain infrastructure.
Pre-tax profit increased 19.7% to £76.0 million in the 26 weeks to June 27, while operating profit rose 22.9% to £86.5 million. Total sales climbed 7.2% to £1.10 billion.
Like-for-like sales at company-managed shops rose 2.1%, with franchised shop LFL sales up 1.3%.
This rate of growth was slower than the 2.5% reported in a May update for the first 19 weeks of the year, but Greggs said its share of food-to-go visits increased 0.3 percentage points to 8.7%.
The bakery chain described the period as a "strong financial performance", although it acknowledged that profit growth benefited from a soft comparison with the previous year and the timing of cost inflation.
Overall cost inflation was 2.2% and is now expected to remain around that level for the full year. Greggs delivered £7 million of its targeted £11 million in 'structural' savings during the half.
The group opened 34 net new shops, taking its estate to 2,773, and opening guidance was lowered to a net 100-110 from 120. It is also trialling smaller "Greggs Express" outlets and opened its first international travel-hub shop at Tenerife South Airport.
Capital expenditure guidance was cut to around £180 million from £200 million. Greggs said stronger cash generation could create scope for additional shareholder returns. The interim dividend was held at 19p per share.
Greggs said pressures on disposable income remain the biggest influence on demand, as well as "an evolution in dietary preferences", including greater choice in portion size, increased protein and more fibre, "and we expect this to develop further in the near term".
The shares leapt over 11% in early trading to above 1,888p, the highest since June last year.
Broker Jefferies said PBT of £76 million was slightly ahead of its estimate of £74 million and company guidance.
"However, we see elements for the bears here too," analysts said, noting that second-half profit is guided to reduce and that LFL sales slowed in the last seven weeks of the half during the hot weather, which has persisted into the second half.
The analysts said the comments on portion size were an acknowledgement of the influence of weight-loss drugs.
** UPDATE: Adds share price and broker comments **
