Greggs PLC (LSE:GRG) said it does not expect material profit growth this year due to a stronger-than-anticipated impact of inflation on raw materials, energy and labour costs.
“Cost pressures are currently more significant than our initial expectations and, as ever, we will work to mitigate the impact of this on customers, however given this dynamic we do not currently expect material profit progression in the year ahead,” said chief executive Roger Whiteside, who is leaving in May and handing over the reins to current CEO designate Roisin Currie.
Cost inflation is expected to be between 6%-7% in 2022, the sausage roll and coffee group said in a statement. As a result, it raised the price of its products at the start of this year and said it anticipates further price rises will be necessary.
The profit warning accompanied results for the year to 1 January 2022, which revealed a return to profit at the group after the lifting of the COVID-19 pandemic restrictions that had hit its performance the previous year.
Pre-tax profit came in at £145.6mln in the year to January, compared with a loss of £13.7mln the year before and a £108.3mln profit two years ago, before the pandemic struck.
Total sales grew to £1.2bn from £811.3mln in 2020 and £1.1bn in 2019. However, like-for-like (LFL) sales in company-managed shops declined 3.3% compared with pre-pandemic 2019.
The company said the current year has started well with LFL sales in company-managed shops up 3.7% compared to the 2020 level and 44.2% higher against the lockdown-affected period last year.
"Our results and achievements in 2021 show that we have emerged from the pandemic both stronger and better as a business. We have started 2022 well, helped by the easing of restrictions,” said Whiteside.
Greggs proposed a final dividend of 42p per share, giving a total pay-out of 57p for the year, and also announced a special dividend of 40p.
The company recommenced its colleague profit-sharing scheme and will share £16.6mln with staff.
Net new shop openings totalled 103 in 2021, taking the number of shops to 2,181. Greggs said it is targeting 150 net new shop openings a year from 2022, with the potential for at least 3,000 shops in the UK over time.
The company also plans to extend the number of shops with late opening to 500 this year. To complement the expansion in evening trade, delivery reach will be extended from 1,000 to 1,300 shops.