Bargain-hunting shoppers bring new year cheer to Greggs and B&M | Greggs

Greggs plans to open 150 more stores this year and B&M is to pay a £200m special dividend to shareholders as both cut-price chains benefit from the search for bargains during the cost of living crisis.

The bakery chain famous for its sausage rolls and steak bakes said sales surged by 18% in established outlets in the run-up to Christmas as it shrugged off the impact of rail strikes and the cold weather to bounce back from a poor 2022, when Omicron prompted many people to avoid high streets and offices.

Total sales rose by 23% to £1.5bn in the three months to 31 December helped by the opening of new stores as well as strong trading in established outlets.

B&M said sales rose 12.3% in the three months to 24 December with profit margins up as it achieved strong sales of grocery and general merchandise lines. The company is paying a 20p a share special dividend, after “strong momentum through the golden quarter”. The final highly profitable three months of the year is known in retail as the golden quarter.

Greggs said its festive bakes, mince pies and salted caramel lattes had sold particularly well, with early evening experiencing the fastest rise in sales as it opens more outlets for takeaway dinners.

It said use of its app, which offers discounts, had also increased as fans of the bakery chain looked for way to save cash.

However, the company warned of “material cost inflation”, hinting it may be forced to put up prices again in 2023 after two rounds of increases last year.

Roisin Currie, the chief executive of Greggs, said: “We enter 2023 in a strong financial position that will enable us to invest in shops and supply chain capacity to bring Greggs to even more customers across the UK. While market conditions in 2023 will remain challenging, our value-for-money offer of freshly prepared food and drink is highly relevant as consumers look to manage their budgets without compromising on quality and taste.”

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said Greggs was benefiting as shoppers “flock to value” during the cost of living crisis.

“Greggs is so confident its strong trading will continue, it’s planning to open 150 shops this year, and is continuing with extended opening hours at over a fifth of its sites,” she said.

“Essentially, Greggs has a lot going in its favour because it exists at the end of the value spectrum, and the group is capitalising on this. However, it will be crucial to closely monitor how out-of-home spending shapes up, because any worse-than-expected drop offs would be bad news for profits when combined with soaring costs.”