Costs take a bite out of Greggs

Published on Thursday 9 October 2008 21:20

POOR weather and a year of rising costs has prompted bakery chain Greggs to cut £3 million from its full-year profit forecasts.

The firm, which recently appointed Scots-born Ken McMeikan as its new chief executive, said increases in energy and ingredient costs had not been passed on in full to customers.

It added that poor weather in August and early September caused like-for-like sales growth to slow to 3.9 per cent in the 16 weeks to 4 October, although sales since mid-September picked up to show growth of 5.7 per cent.

Greggs, which has about 170 of its 1,400 stores north of the Border, said: "As a consequence of the period of slower sales growth and temporary margin impact from higher costs we are reducing our expectations of operating profit for the current financial year by some 3m."

Analysts had been expecting pre-tax profits of about 48m for the year to the end of December.

The company added: "We are now reaching the anniversary of the first of the very substantial cost increases that started in 2007, and are seeing a stabilisation of the prices of many major ingredients and reductions in some areas including vegetable oils and vehicle fuel. This, combined with tightened control of operating costs, promises a more positive outlook for operating margins in the final 12 weeks of the year."