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FTSE 250: Greggs shares up as inflation bites profits

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Greggs forecast overall cost inflation to rise more than predicted this year amid the cost of living crisis. Photo: Christopher Furlong/Getty
Greggs forecast overall cost inflation to rise more than predicted this year amid the cost of living crisis. Photo: Christopher Furlong/Getty

Shares in Greggs (GRG.L) rose on Tuesday after reporting sales topped pre-COVID levels as cash-strapped consumers grab cheap lunches, but profits are flat amid rampant inflation.

The FTSE 250 (^FTMC) bakery chain said first-half sales were 12% in the first half compared to 2019, even thought footfall to its stores was lower.

Greggs, famed for its steak bakes and sausage rolls, warned costs are rising "significantly" due the pricing of food and packaging for the costs rise.

The company forecast overall cost inflation to be 9% this year, up four percentage points on predictions at the start of 2022.

Read more: McDonald's raises price 99p cheeseburger as it passes rising costs to customers

It comes as the chain raised its prices by between 5p and 10p earlier this year to cover the surging costs of ingredients and its workforce.

It said on Tuesday that it's made further small price increases, although they haven’t impacted sales figures.

Sales jumped 27% to £694.5m ($848.4m) in the six months to 2 July after shoppers returned to Britain's high streets as pandemic measures eased.

Company shares shot up as much as 2.4% following the update on Tuesday in London.

Analysts noted that Greggs appears to be "holding up well" amid cost of living "pressures".

Russ Mould, investment director at AJ Bell, said: "Clearly its relatively cheap offering is resonating with cash-strapped consumers who are perhaps trading down from more expensive options.

"The danger for Greggs is that people make their own packed lunches at home rather than grabbing food and drink on the go but there is little sign of that shift happening at any scale just yet."

The results come after the bakery chain was blocked from opening a 24-hour flagship store in Leister Square after the council refused a licence over fears it could be a "hotspot" for trouble.

Greggs had applied to Westminster City Council to sell food and drink in its newly-opened West End store from 11pm to 5pm. It is currently open from 6am to 11pm from Monday to Saturday.

Watch: How does inflation affect interest rates?

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