Greggs Increases Prices and Warns of Higher Costs Amid Slowing Sales
Greggs has raised prices and reported slower sales growth, prompting concerns about higher costs and consumer confidence in the UK bakery chain
Greggs, UK, Sales, Prices, Costs, Consumer Confidence
London: Shares in Greggs took a hit, dropping nearly 10% on Thursday. The popular UK bakery chain announced it’s raising prices on some items and warned of rising costs this year. Sales growth is slowing down, which has investors worried.
In a trading update, Greggs revealed that like-for-like sales grew by just 2.5% in the fourth quarter. That’s a drop from the 5% increase in the previous quarter and way down from the 9.4% growth they saw last year.
They mentioned that the latest figures reflect a quieter high street, which isn’t great news. But on a brighter note, seasonal products like their festive bake and vegan options are still in high demand.
For the entire 2024 financial year, sales rose by 5.5%, but that’s a far cry from the 13.7% growth they had last year. Even though total sales hit a record of over £2 billion, the growth rate is slowing compared to nearly 20% last year.
Greggs’ CEO, Roisin Currie, pointed out that lower consumer confidence is affecting foot traffic and spending. Still, she believes the company is ready to tackle the challenges ahead.
Looking forward, Greggs plans to open 140 to 150 new shops this year, including 50 relocations. They’re also warning that employment costs will lead to more inflation, but wage increases might help consumers a bit.
Greggs has shown it can handle cost inflation while keeping prices reasonable. They even signed an open letter to Chancellor Rachel Reeves, expressing concerns about job losses and rising prices due to recent budget changes.
Businesses are feeling the pinch from higher costs linked to the national minimum wage and employer national insurance contributions. Reports say Greggs has already raised some prices by 5p to 10p.
As of now, a spokesperson for Greggs hasn’t commented on the situation. On the same day, shares in other UK retailers also dipped, reflecting a gloomy economic outlook.
Despite strong Christmas sales, M&S warned about uncertain economic growth and rising costs from tax increases. Concerns about stagflation in the UK have led to a sell-off in government bonds, raising borrowing costs.
Economists are worried that this could pressure the government to hike taxes or cut spending. Russ Mould from AJ Bell noted that the initial optimism after last summer’s election has faded, leaving companies and consumers anxious about rising costs and job security.
He added that while the UK is facing higher borrowing costs, it’s not alone, as the US is experiencing similar issues. The pound is still stronger than it was during Liz Truss’s brief time in office.
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