Greggs has raised investor hopes of another profit upgrade after revealing its “sustained” recovery in sales has proved stronger than anticipated, despite increased competition on the high street.

The bakery and fast food chain released an unscheduled update to the market on Monday in which it said that while pent-up demand had diminished as looser COVID-19 restrictions allowed stores to fully reopen, sales growth was up when compared to pre-pandemic levels.

“We had expected to see increased competition as cafes and restaurants were allowed to compete more effectively with our largely take-out offer, Greggs said.

“In recent weeks the impact of pent-up demand for retail has reduced but, nonetheless, like-for-like sales growth in company-managed shops has remained in positive territory ranging between 1% and 3% when measured against the same period in 2019.

“This level of sustained sales recovery is stronger than we had anticipated and, if it were to continue, would have a materially positive impact on the expected financial result for the year.”

The company – best known for its steak bakes and sausage rolls – had raised its profit outlook just last month, despite like-for-like sales in the eight weeks to 8 May falling by almost 4%.

Previously, Greggs had said it did not expect profit to return to pre-pandemic levels until 2022 at least given the disruption to its business model from the public health emergency that had stopped dine-in visits and dampened demand for takeaways.

Shares rose 3% at the market open.

Shore Capital Markets analyst Clive Black said of the update: “Greggs has bounced back exceptionally well it should be said, and has showed itself to be very much a loved brand by shoppers…

“The brand does still have to face into that full re-opening competition whilst costs in FY22 are likely to include a greater level of business rates, albeit sales comparatives and the expansion of the business should support margin.”

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