Greggs Rises After Upbeat Guidance on Cost Pressures

By Geoffrey Smith 

Investing.com -- Greggs PLC (LON:GRG) shares rose sharply at the open on Tuesday after the U.K. bakery chain said it's getting on top of the inflation pressures that have plagued retailers all year.

"We now hold an appropriate level of forward purchasing cover in respect of our fourth quarter requirements for key food and energy commodities," the company said as it reported a 9.7% rise in like-for-like sales in the third quarter. It repeated its forecast of around 9% cost inflation over the year - something that itself represents a degree of improvement after a string of upward adjustments in recent months. 

It added that it also has "significant energy cover for the first quarter of 2023, with average costs expected to be below the level of the recently-announced price cap."

Chief executive Roisin Currie told Reuters that the group is continuing to defray those costs with price rises of its own.  It raised the price of its signature sausage rolls for the second time this year as of Monday, along with price rises on various other products. 

Currie said she hoped it would be the final round of price increases this year but could not guarantee it.

Greggs stock, which had lost around 30% in the last six months as the U.K.'s cost-of-living crisis battered consumer-facing sectors, increased by 6.8% as of 03:30 ET (0730 GMT). 

The company was still cautious about the outlook, seeing "considerable uncertainty in the economy as a whole," but adding that its own trading is in line with expectations - a trend that it trusts will continue through the end of the year. 

Store openings throughout the year allowed Greggs to raise overall sales 14.6% from a year earlier in the 13 weeks to October 1. The company said, however, that it would delay some planned capital expenditure to next year, cutting its estimated spending this year by 50 million pounds to £120 million ($136 million).

Analysts at Jefferies said the update showed "impressive resilience", with sales growth re-accelerating in September - despite losing a day for Queen Elizabeth's funeral - after an August slowdown that was due largely to base effects. Many more Britons had holidayed at home last year due to the difficulties of travelling internationally.