Bakery retailer Greggs has warned profits will be lower following a dip in sales as rainy weather in August and September kept customers away.

Like-for-like sales slowed to 3.9 per cent over the 16 weeks to October 4th, compared to a 5.8 per cent rise last year.

Better weather and an advertising campaign emphasising the value of its products have recently provided a boost, with sales rising by 5.7 per cent in the last three weeks.

“In spite of the increasing pressure on household budgets we have seen only modest erosion of customer numbers and transaction values,” the retailer said.

Substantial increases in energy and ingredient costs are presenting a significant challenge, however.

Unable to pass the costs on to hard-pressed consumers, Greggs said the increases have been eroding its profit margin over the year.

“As a consequence of the period of slower sales growth and temporary margin impact from higher costs we are reducing our expectations of operating profit for the current financial year by some £3 million,” the firm warned.

Greggs also said it is cutting investment over the year from £40 million to £36 million as a “prudent” measure.

But the business remains debt-free and Greggs said it has seen some stabilisation of prices recently, which may help widen profit margins in the final 12 weeks of the year.