UK bakery chain Greggs plc (LON:GRG) has warned of an uncertain sales outlook and a hit to profit in the first half as rising inflation begins to eat away at disposal incomes.
A weaker pound after the UK voted to leave the European Union last June has pushed inflation higher, resulting in a consumer spending squeeze.
Greggs said an increase in input costs have had a “modest impact” on its margins in the first half of the year but it has a better idea of costs in the second half and expects this pressure to ease towards the end of the year.
“Whilst this pattern will constrain profit growth in the first half of the year we expect to make progress in line with our previous expectations for the year as a whole,” it said.
Nevertheless, Greggs dished up a 7.5% increase in total sales in the first 19 weeks of the year, compared to 5.7% growth a year ago.
Like-for-like sales at company-managed shops grew 3.6% during the period, slowing slightly from a 3.6% increase in 2016.
Sales were boosted by its popular £2 breakfast offer and its Balanced Choice range, which includes cold-pressed juices, salads and wraps.
Greggs opened 42 new shops, focused on food-on-the-go locations, and refurbished 87 shops. It closed 14 stores, bringing the total number to 1,792, including 1,615 company-managed shops and 177 franchised units.
The group also invested in new systems to improve its ordering process.
Shares rose 0.19% to 1,073.0p in morning trading following an initial dip.