Greggs warns of rising costs, labor shortages and supply chain issues
Greggs (GRG.L) stock rose 4.3% early in Tuesday as investors digested news that it expects to exceed expectations for the previous year.
The news comes despite pressure on staff and supply chains. The Main Street staple said it was “confident” for the fall.
The FTSE 250 company said the availability of labor and the supply of ingredients had caused problems, as well as price increases. “We expect costs to increase towards the end of 2021 and through 2022,” he said.
Like-for-like sales for the third quarter over two years were up 3.5%.
To concern: Boris Johnson addresses UK supply chain issues
The update also contained further details of its bullish expansion plans, with the “potential” of at least 3,000 stores in the UK and net store growth per year of 150 from 2022.
“The shape of the new store pipeline reflects the opportunities that have been successful for us in recent years as we reposition the field to mobile locations,” he said.
“The overall UK take-out market remains depressed by around 15-20% as the UK’s new appetite for working from home keeps commuter volumes in check,” said Ross Hindle, analyst at Third Bridge .
“Greggs has been able to outgrow his weight in this climate because of its low prices, large-scale marketing and stores outside of city centers.”
As a result of the update, Shore Capital changed its previous recommendation from SELL UNDER REVIEW.
Greggs isn’t the only chain feeling the effects of supply chain issues, which are rippling across the industry. The Road Haulage Association (RHA) reported earlier this year that there was a shortage of 100,000 drivers and warned the situation had reached a “crisis point” with the failure of critical supply chains.
Read more: Why is the UK facing a shortage of truck drivers and what could this mean for consumers?
He said many drivers have returned to their home countries either due to uncertainty over new Brexit rules or due to COVID-related lockdown restrictions in the UK. Many did not return.
In addition, drivers of heavy goods vehicles (heavy goods vehicles) are made up of an aging population which is retiring; and there is a significant backlog of testing to pass before drivers can qualify to drive trucks, as testing has been suspended during the pandemic.
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