Britain’s seemingly insatiable appetite for Greggs’ sausage rolls and pies could be easing according to disappointing figures that sent the bakery chain’s shares tumbling.

The Newcastle-based company revealed it had experienced “challenging” trading during the first half of the year, with underlying profits down from £18.6 million to £17.3 million.

“We do not anticipate that the second half will bring any alleviation of the tougher consumer spending environment with disposable incomes remaining under pressure,” said the company.

Greggs’ shares, which until recently were among the market’s strong performers, dropped 38p, or 8 per cent, to 444p, in their biggest one-day fall since 2008.

Ken McMeikan, chief executive, said he was confident that like-for-like sales would increase over the full year, but that rising ingredient costs, including commodity prices for wheat, dairy products and meat, were not likely to abate.

“The tough economic environment plays to Greggs’ strengths, because we have got a great reputation for value,” he said. “We have been in tough times for the last three years and we have seen positive like-for-like [sales] during that period, despite footfall being down on the high street.”

Greggs is wooing Middle Britain with competitively priced croissants and hot drinks. The company enjoyed a 23 per cent increase in coffee sales during the first half, as its customers snapped up cappuccinos and lattes as well as sandwiches and sticky buns.

A record store opening programme helped to lift the group to a 4.2 per cent improvement in sales although if the contribution of new stores was stripped out, sales were up just 0.4 per cent.

Mr McMeikan said that flour prices shot up 30 per cent year-on-year in the six months, with meat prices between 3 per cent and 30 per cent higher. Dairy and energy prices were also sharply higher.

The company said that it expected flour prices to fall in coming months, but that it is anticipating further energy price rises. Mr McMeikan said that the cost rises would add to the pressure for the company to find cost savings.

It has a target of reaching £5 million savings this year, having found £1.5 million in the six months to July 2.

Source: The Sunday Times