Shares in Greggs (GRG.L) slumped nearly 10% on Thursday morning, after the UK bakery chain reportedly raised prices on some products and warned of higher costs this year, as well as posting a slowdown in sales growth.
Greggs said in a trading update, released on Thursday, that company-managed shop like-for-like sales had grown 2.5% in the fourth quarter, which was down from the 5% increase it reported in the third quarter. This was also down from the 9.4% growth the business posted for the same period last year.
The food-on-the-go retailer said its latest fourth quarter figures reflected the “more subdued high street footfall”.
However, Greggs said demand was high for its line of seasonal products in the fourth quarter, including its festive bake, the vegan festive bake and its new festive flatbread.
For the full 2024 financial year, Greggs said company-managed shop like-for-like sales had risen by 5.5%, which was well below the 13.7% growth it reported last year.
While Greggs posted record total sales of more than £2bn for the year, which was up 11% on 2023, this rate of growth was still slower than the nearly 20% increase it reported last year.
Greggs CEO Roisin Currie noted that “lower consumer confidence continues to impact high street footfall and expenditure” but believed that the company was well positioned to “meet the headwinds we expect to see in the year ahead”.
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The bakery chain said it planned to open between 140 and 150 shops this year, which would include 50 relocations.
In its outlook for 2025, Greggs warned that “employment costs will result in further overall cost inflation, although wage increases should provide support to consumers”.
“Greggs has demonstrated its ability to mitigate cost inflation in recent years whilst retaining its value leadership, and we are confident we can continue to do so,” the company added.
The bakery chain was one of more than 70 businesses to sign an open letter to chancellor Rachel Reeves in November, which warned that policy changes announced in the autumn budget would make “job losses inevitable, and higher prices a certainty”.
Businesses have warned of the impact of higher costs from increases in the national minimum wage and employer national insurance contributions, announced in the budget.
According to a report by the Independent, Greggs has already raised some of its prices between 5p and 10p.
A spokesperson for Greggs had not responded to Yahoo Finance UK’s request for comment at the time of writing.
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On Thursday, shares in other UK retailers also fell as downbeat sentiment over the economy weighed on the sector.
Despite posting strong Christmas results, M&S (MKS.L) also warned that the “outlook for economic growth, inflation and interest rates is uncertain and the business faces higher costs from well-documented increases in taxation.”
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Concerns of stagflation the UK has prompted a sell-off in UK government bonds, which has sent yields higher. Yields are effectively the interest rate return that investors receive for investing in this debt, which means the cost of borrowing for the UK government has risen.
The surge in borrowing costs has sparked economist concerns that this could put pressure on Reeves to further increase taxes or cut public spending.
Russ Mould, investment director at AJ Bell (AJB.L), said: “The feel-good factor around the UK following last summer’s general election has quickly disappeared and turned to gloom as companies brace themselves for higher costs and consumers worry about job security and the cost of living going up again.
“Investors are worried about extra borrowing by the government to achieve its plans,” he said. “However, it is worth noting that the pound remains considerably stronger than when Liz Truss briefly ran the country. The UK is also not alone in seeing a higher cost of borrowing for the government as the US has also seen higher yields.”
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