UK bakery chain Greggs plc (LON:GRG) served up 2017 sales growth but cautioned that it expects industry-wide cost pressures to continue in the year ahead.
In a trading update for the year to 30 December 2017, total sales rose 7.4% and like-for-like sales at company-managed stores increased 3.7%.
READ: New ranges and breakfast demand boost sales at Greggs
Shares rose 3.3% to 1,348p in morning trading.
Popular items included classic favourites, festive baked goods, hot sandwiches and a gluten-free soup, Greggs said. The group extended its product range to include a caramel latte and introduced a new focaccia style pizza.
It also opened 131 new stores and closed 41, bringing its total estate to 1,854 shops at the end of the year. The company converted 132 company-managed shops to its ‘bakery food-on-the-go’ format and franchise partners refurbished a further 10 units.
Savvy decisions
"The high street chain has made a series of savvy decisions in the last year or so, including the introduction of drive-thru stores and delivery, as well as a healthy food range, and it’s clearly paying off, with the brand aiming for a McDonald’s style eat here any-time of the day approach rather than its previous lunch-focus," said Connor Campbell, financial analyst at Spreadex.
Greggs plans to roll out more stores in the year ahead with net additions expected to be in the 100-130 range. It expects to refurbish about 100 shops in 2018 in line with its food-on-the-go strategy.
"Looking forward we expect industry-wide cost pressures to continue in the year ahead, albeit at a lower level than we experienced in 2017," Greggs said.
"In an uncertain consumer environment we will continue to focus on delivering the outstanding value and taste that Greggs is famous for."
Consumer spending slowed in 2017 as higher inflation and weak wage growth diluted disposable incomes. Brexit uncertainty pushed the pound lower causing inflation to rise sharply last year.
"That the group is still driving steady like-for-like sales growth from the existing estate is hugely impressive, as is the ability to open new stores without cannibalising significant numbers of existing customers," said Nicholas Hyett, equity analyst at Hargreaves Lansdown.
"At least as important has been the ongoing investment in the supply chain. It would have been tempting to fatten up the store estate without investing in the necessary infrastructure to support it. Greggs avoided those potential growing pains, while maintaining the vertical integration that makes it unique."