- Challenging second half back drop
- Lower consumer confidence
- Greggs passes on price hikes to consumers
Shares in Greggs (GRG) fell by as much as 10% to £23.46 in morning trading despite the food-on-the-go purveyor reporting a 11.3% rise in full-year 2024 sales to £2 billion.
Greggs said seasonal lines were in high demand in the fourth quarter including Festive Bake, the Vegan Festive Bake, and the all-new Festive flatbread.
Food items like pizza continued to prove popular with consumers, with the sales of pizza boxes and bundle deals continuing to grow.
Greggs said a record 226 new shops had been opened in 2024 and it hopes to open between 140 to 150 net new shops in 2025.
Despite these impressive numbers, Greggs CEO Roisin Currie warned of lower consumer confidence which ‘continues to impact High Street footfall and expenditure.’
Greggs shares have fallen 14% year-to-date reflecting investor concerns about the food-on-the-go purveyor passing on price increases to consumers.
Investors might also be concerned about increased employment costs in 2025 (because of the changes announced by Labour chancellor Rachel Reeves in the Autumn Budget) which will result in further overall cost inflation.
Greggs however remains confident that it will be able to mitigate future cost inflation (which it has done in the past).
EXPERT VIEWS
Russ Mould, investment director at AJ Bell said: ‘Public outrage over Greggs adding another 5p to the price of a sausage roll to £1.30 shows how sensitive consumers are to price hikes. The cost of food has kept going up and we’re reaching a tipping point where people are saying enough is enough, and they’re cutting back on non-essentials.
‘Greggs’ sausage rolls now cost 30% more than in 2022 when you could get one for £1. Some people will stomach the higher price, but others will buy less often or not at all, which means Greggs needs to come up with a new game plan. After all, it continues to open new stores and costs are mounting up.
‘Over the past year, analysts have regularly nudged down their 2025 earnings forecasts for Greggs and this trend remains intact following the disappointing post-Christmas update with a further reduction in estimates.’
Mamta Valechha, consumer discretionary analyst at Quilter Cheviot says: ‘Greggs will post a more granular update in March, but until then we anticipate some prudent cuts to like for like forecasts for 2025 given the combination of a soft end to 2024 and the subdued consumer sentiment as we head into 2025.
‘While Greggs is facing its fair share of headwinds, its strong value proposition means the company remains well placed to take market share and continue to drive profits in full year 2025. This will continue to be helped along by the group’s initiatives which include expanding into new spaces, extending its menu, and driving higher evening sales and increased digital participation.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (Martin Gamble) own shares in AJ Bell.
