- Positive like-for-likes in first 20 weeks
- Product innovation driving growth
- Supply chain investments on track
Shares in Greggs (GRG) rallied 7.4% to £21.46 after the food-to-go brand reported an improvement in trading over the past 11 weeks, driven by product innovation as well as the sunnier British weather.
Its been a tough start to 2025 for the value sandwiches-to-sausage rolls seller, whose shares have fallen on growth slowdown fears, so there was relief as Greggs left full-year guidance unchanged - consensus calls for pre-tax profits of £187 million – and insisted its plans for managing inflation are ‘progressing well’.
LIKE-FOR-LIKES BEAT
Greggs’ like-for-like sales in company-managed shops rose by a better-than-expected 2.9% in the first 20 weeks of 2025, marking an acceleration from the 1.7% growth delivered in a weather-blighted first nine weeks of 2025 and the subdued 2.5% rise seen in last year’s fourth quarter.
Encouragingly, the Newcastle-based baker highlighted an ‘improved performance’ in the last 11 weeks, no doubt helped by recent better weather.
Greggs stressed that this improved like-for-like performance was delivered in what remains ‘a challenging market context, and during a period that compares with our strongest performance in 2024’.
INNOVATION STOKES GROWTH
Total sales fattened up 7.4% to £784 million in the 20 week period, with Greggs insisting that product innovation is ‘playing its part’.
Guided by CEO Roisin Currie, the retailer called out strong consumer demand for its pizza boxes, observed that its iced drinks were selling well and said hot food options, such as its Southern Fried Chicken Goujons and Southern Fried Potato Wedges, have been ‘further complemented by our newly launched Mac and Cheese which went viral on TikTok’.
Greggs added that its investments to increase supply chain capacity are on track and given a strong pipeline, the FTSE 250 firm remains confident in opening 140 to 150 net new shops for the full year.
Currently trading from a total of 2,638 shops, the company aspires to expand to more than 3,500 UK stores.
WHAT ARE THE ANALYSTS SAYING?
‘A robust improvement in Greggs’ like-for-like trend, even if largely driven by comps and a change in the weather backdrop,’ observed Jefferies.
‘In our view, this should give additional reassurance that the annualisation of the step-down in volumes in H2’24 should yield another step up in like-for-like sales as we progress through FY25. The shares have begun to recover, but we see more to go for and retain our positive stance.’
Panmure Liberum, which has a ‘sell’ recommendation on the stock, noted that in line with other retailers reporting recently, trading at Greggs has improved over the past 11 weeks, ‘no doubt supported by favourable weather and stronger footfall. While this provides a more solid underpinning for near-term forecasts, we still remain cautious and are surprised that recent product innovation and strategic initiatives are doing little to move the dial more meaningfully.’
AJ Bell investment director Russ Mould commented: ‘Sentiment had waned towards the stock over the past year as its growth has moderated. The latest update contained enough golden nuggets to win back some investor support and trigger a new rally in the shares. That’s fine for now, but Greggs needs the bright weather to remain in place throughout summer if it wants to get back on top.’
Mould added: ‘Large sums are being spent on manufacturing, distribution, logistics and new sites, so Greggs is making a big commitment to try and gobble up even more market share. It wouldn’t spend all this money if it didn’t see a big opportunity to keep growing. The proof will be in the pudding and whether this investment translates into a meaningful increase in profits.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Martin Gamble) own shares in AJ Bell.
DISCLAIMER: James Crux has a personal investment in Greggs.
