Greggs sales up as it warns on inflation

High Street food chain Greggs has reported a rise in both sales and profits, but it warned it is facing increased inflationary pressures and greater economic uncertainty.

Total sales rose by 7% to £894.2m last year, while pre-tax profits hit £75.1m, up from £73m in 2015.

But the company said, external the consumer outlook was "more challenging" than it had been.

Greggs is shifting from being a bakery business to focusing on food-to-go.

"The UK consumer outlook is more challenging than we have seen in recent years, with industry-wide pressures emerging in commodities as well as labour costs," said chief executive Roger Whiteside.

"However we are confident of making further progress as we implement our plan to grow Greggs as a contemporary food-on-the-go brand."

The weaker pound means imported food is more expensive, meaning retailers either have to absorb those costs or try to pass them on to consumers.

Chairman Ian Durant said: "In the short term we face a period of greater economic uncertainty and increased pressure from cost inflation."

In 2013, Greggs announced a five-year strategic plan to shift from being a traditional bakery to focusing on the £6bn food-to go market.

It said its business had been transformed in that time, "delivering an unbroken record of positive like-for-like sales and new levels of profit".

Like-for-like sales - which strip out the impact of store openings and closures - in outlets managed by the company rose by 4.2%.

Demand for its Balanced Choice range of healthier options with fewer than 400 calories had been growing, said Greggs.

It said this range now accounted for more than 10% of its sales, with revenues exceeding £100m in 2016.

It is also piloting a "healthier shop" at New Cross Hospital in Wolverhampton which is designed to meet heath guidelines.

Greggs said 2017 had started "in line with expectations". Company-managed shop sales were up by 2% in the eight weeks to 25 February.

The business is in the midst of a shake-up which has already seen it close two of its 12 bakeries. A third is due to close later this year.

Greggs plans to invest in its remaining bakeries and shops, which it said would create thousands of new roles in retail and distribution.

However, it will mean fewer jobs in manufacturing and the company said it was consulting with trade unions about the proposals.