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Highlights
- The British bakery chain has reported pre-tax profits of £145.6 million in 2021.
- The bakery chain is expecting a rise in prices for the second time this year due to surging staffing, energy, and raw material costs, plus tax charges due to the Russia-Ukraine crisis.
- The average pay in the UK picked up for a while but failed to keep up with the rising costs of living.
British bakery chain Greggs Plc (LON: GRS) has been grabbing eyeballs after the company warned that its prices are likely to go up for the second time this year as the overall prices are going up due to rising costs of energy, food, and staff. On 8 March 2022, the bakery chain also announced its preliminary results for the year ended 1 January 2022.
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Price rise
With the escalating geopolitician tension between Russia and Ukraine and tougher sanctions on Russia, the prices of food, energy, and various commodities are skyrocketing to record highs. The bakery chain, known for its sausage rolls and steak bakes, is expecting the cost of doing business to rise between 6% and 7% this year due to surging costs, like manpower, energy, and raw material costs, plus taxes.
The fast-food chain revealed that it has increased its prices by 10p at the start of the year and it is expected to rise further. The company also said that it has raised overall wages by 3% last year and has plans to raise wages by five months, which will add £4.5 million to its total costs.
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Global energy prices began to rise sharply as economies started to recover. It further escalated after Russia’s assault against Ukraine. Meanwhile, the average pay in the UK picked up for some jobs but the pay rise failed to keep up with the rising costs of living.
The announcement led to around a 9% fall in Greggs Plc’s share price on Tuesday to a one-year low of £20.96 despite the company swinging back to pre-tax profit in this year to 1 January.
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Result and Outlook
The British bakery chain has reported pre-tax profits of £145.6 million in the year to 1 January, from the first-ever loss of £13.7 million in 2020. The company performed much better in 2021 as its profits were higher than its pre-pandemic profit of £108 million in 2019. While its total sales were up by 5.3% to £1,229.7 million, like-for-like sales in its managed shops were down by 3.3% on its 2019 levels. However, in the first nine weeks of this year, the like-for-like sales of the bakery chain jumped by 3.7% compared to levels in 2020.
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The company will resume its profit-sharing programme that was suspended after it made a loss last year and will pay a special dividend of 40p per share. It has promised to share 10% of its profit with staff each year and this time it will share £16.6 million.
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Share price performance
Greggs Plc (LON: GRG) specialises in savory products, such as bakes, sausage rolls, sandwiches, and sweet items, and is listed on the London Stock Exchange. It is a constituent of the FTSE 250 Index. The market cap of the company stands at £2,247.90 million as of 9 March 2022.
Greggs Plc’s shares were trading at GBX 2,293.00, up by 3.94%, at 8:45 AM (GMT), on 9 March 2022. The stock has given a return of -31.23% on a year-to-date (YTD) basis and over the last one year, it has delivered a return of 6.92% to its shareholders.
Note: The above content constitutes a very preliminary observation or view based on industry trends and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.
