- Full-year profit downgraded
- High temperatures hurt sales
- Cost inflation outlook unchanged
Food-to-go brand Greggs (GRG) warned this year’s operating profit could be ‘modestly below’ the £195.3 million generated in 2024, with the bakery chain blaming the recent heatwave for a downturn in trading.
The unscheduled trading update triggered downgrades from analysts, who were predicting flat earnings, and sent shares in the value sausage rolls-to-steak bakes seller down 14% to a 52-week low of £17.01 in early dealings.
SALES MELT AWAY
Total sales rose 6.9% to the best part of £1.03 billion in the half ended 28 June 2025, and the food-on-the-go favourite delivered 2.6% like-for-like sales growth.
However, May’s ‘good progress’ was followed by a like-for-like slowdown in June as searing temperatures reduced footfall to Greggs’ stores, albeit the balmy conditions boosted demand for its cold drinks.
The FTSE 250 pastie purveyor now expects first-half operating profit to be lower year-on-year, reflecting stronger comparatives, the phasing of refurbishments and cost recovery initiatives.
And while Greggs acknowledged like-for-like comparatives should be less demanding in the second half, in light of current trading conditions ‘the board now anticipates the full-year operating profit could be modestly below that achieved in 2024’.
Greggs, whose turnover topped £2 billion for the first time in 2024, opened 87 new shops and shuttered 56 shops in the half, leaving a total of 2,649 shops trading as at 28 June, and remains confident in achieving 140 to 150 net openings for the full year.
IS SAUSAGE ROLL KING TELLING PORKIES?
Dan Coatsworth, investment analyst at AJ Bell, said: ‘We’ve only had a few days of the temperature being uncomfortably high so one might suggest sausage roll king Greggs is telling porkies. It might simply be that shoppers are losing their appetite for the brand.’
Coatsworth added: ‘Overall, Greggs should have still benefited from the sunshine. It begs the question of whether Greggs is simply using the weather as a reason to mask bigger problems.
‘Even though Greggs continues to open new stores and talk up opportunities, on a like-for-like sales basis it is having to work extra hard to make progress. The shares have been weak since last September as investors ask if we’ve reached peak sausage rolls territory and the latest trading update is only going to add to market fears.’
BROKER VIEWS
‘We downgrade our pre-tax profit forecasts by 8% for this year and continue to argue that deteriorating volumes and market share momentum are concerning,’ commented Panmure Liberum, which has a ‘sell’ rating on the stock.
‘Strategic initiatives such as evening trading and delivery continue to show limited traction, while rising cannibalisation risks mean that delivering sustained volume growth required to offset elevated cost headwinds will be challenging.’
Jefferies, which has a ‘buy’ rating on the stock, said: ‘The recent good weather has undoubtedly been a factor in sector trading, and Greggs is one for which extreme heat is unfavourable (think sausage rolls and steak bakes).’
The broker continued: ‘While obviously disappointing that full-year expectations are nudging back, we do not see this as a reflection on the underlying health of the business and it does not change our view on the fundamentals. We expect like-for-like sales acceleration in the second half, and continue to see upside.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Ian Conway) own shares in AJ Bell.
DISCLAIMER: James Crux has a personal investment in Greggs.
