Chicken roll boosts sales but Greggs warns of food inflation
Brits’ warm embrace of the new chicken sausage roll has helped boost turnover at Greggs, but the company warned it could be burnt by food inflation if the Iran war persists.
Greggs’ share price jumped more than six per cent on Tuesday’s market open, to 1,618p, though the stock remained down three per cent in the year so far.
The FTSE 250 bakery chain cheered 3.3 per cent year on year sales growth in recent weeks, with 20 new shop openings this year.
Greggs has doubled down on its aggressive store expansion in recent years, as it plans to open 120 new sites this year, but has seen its share price fall amid investor fears the market has reached “peak Greggs”.
The bakery chain says its “chicken roll” has quickly become a “customer favourite” and has been a “standout” performer in the year so far.
Greggs launched the chicken roll in April, rounding out a so-called “trilogy” alongside its iconic sausage and more recent vegan rolls.
Greggs doubles down on menu expansion
The bakery chain has embarked on an ambitious menu expansion in recent years, with its new matcha drink offering and tandoori chicken pizza being well-received by customers.
Greggs had become the most-shorted stock on the FTSE earlier this year as analysts warned it could be diluting its appeal, but chief executive Roisin Currie has insisted growth lay in “rapidly evolv[ing] our menu”.
Despite the chicken roll boost, Greggs warned it will see cost inflation balloon by the end of the year if the conflict in the Middle East persists.
“We are monitoring the situation in the Middle East and should the conflict continue and become prolonged we, like all food retailers, will likely see higher overall cost inflation through the end of 2026 and into 2027,” the firm said.
Food inflation could bite
Industry figures have warned delayed food inflation caused by the Iran war could bite in the coming months, as one leading trade body warns prices could rise at a double-digit rate.
The Bank of England has said it could see six or seven per cent food inflation this year, and leading supermarkets Sainsbury’s and Tesco have said they are doing everything in their power to keep food prices down.
However the firm said it is protected by fixed terms for 85 per cent of its energy requirements for this year – and 50 per cent of next year’s – and maintained its profit guidance.
Greggs has issued several profit warnings in recent years as rising employment costs and the popularity of weight-loss drugs threatened to eat away at the firm’s margins.
Duncan Ferris, an analyst at investment platform Freetrade, said: “Headwinds remain, including a tough consumer backdrop and the risk of higher cost inflation arising from the situation in the Middle East.
“But, in spite of concerns the country had reached its sausage roll saturation point, perhaps we are not quite at ‘peak Greggs’ just yet.”
Greggs delivered a gift to British expats on Tuesday when it announced it would open its first outlet abroad, at Tenerife South Airport.
The Newcastle-based baker was founded in 1939 and currently operates 2,759 stores across the UK.