Greggs Faces Summer Trading Challenges Amid Heatwave Concerns Says Jefferies

Greggs PLC could experience another summer trading slowdown as the prolonged UK heatwave dampens demand for its core hot product offerings, including sausage rolls and steak bakes, according to research from Jefferies. Despite these concerns, the broker anticipates solid first-half profits from the FTSE 250-listed bakery chain.

Ahead of the company’s interim results scheduled for 29 July, Jefferies highlighted that Greggs maintains a strong pricing position following a 4% increase implemented at the start of the year. Analyst Andrew Wade estimates that the company’s price inflation remains broadly aligned with the wider market, which should help support margins whilst maintaining competitive positioning.

The unusually hot weather has emerged as a fresh area of concern. Wade noted that Greggs was compelled to reduce guidance last July after elevated temperatures suppressed demand for hot pastries and pizzas. Whilst the analyst is not forecasting another profit warning, he believes recent trading has softened and the prospect of a weather-driven summer boost has diminished.

Questions have been raised regarding whether Greggs’ slower like-for-like sales growth reflects more than weak consumer confidence. Management has attributed subdued performance to reduced retail footfall and cautious consumer spending patterns. However, Wade argued that the same symptoms could reflect the growing uptake of GLP-1 medications. Evidence suggests these drugs most significantly impact users’ desire for high-fat, calorie-dense snacking, which could represent an enduring headwind for certain food-to-go operators, including Greggs.

Jefferies has maintained its hold rating and 1,610 pence price target on the stock. The broker stated that whilst the business remains well positioned over the long term, it faces a more challenging trading backdrop in the near term ahead of its results later this month.