Greggs shares drop as sales growth slows down

Greggs, Britain’s largest bakery chain, has seen its shares tumble by 11.5 per cent to a two-year low of £18.42, as the company reported a continued slowdown in sales growth. In the first nine weeks of this financial year, like-for-like sales at company-managed shops rose by just 1.7 per cent, a stark contrast to the 8.2 per cent growth reported in the same period last year. Poor weather in January, which led to temporary store closures, was pinpointed as a key culprit for weaker results.

This decline follows a softer fourth quarter, where growth slowed to 2.5 per cent, down from 5 per cent in the third quarter. Greggs’ Chief Executive, Roisin Currie, attributed the slump to ongoing consumer caution, with many prioritising saving over spending amidst economic uncertainty. She noted, “It has been a challenging winter, and we expect similar conditions to persist for the time being.”

Despite these challenges, Greggs posted solid annual figures for the year ending December 28, with total sales topping £2 billion for the first time in its history. This represented a 5.5 per cent like-for-like growth year-on-year, underscoring the business’s resilience in a difficult food-to-go market. Underlying pre-tax profits rose by 13.2 per cent to £189.8 million, slightly exceeding analysts’ forecasts. In light of these results, the company announced a final dividend of 50p per share, bringing the total yearly payout to 69p, an annual increase of 11.3 per cent.

The company continues to expand its reach, opening 226 stores last year to bring its portfolio to 2,618 outlets. Looking ahead, Greggs plans to open between 140 and 150 new stores in the next 12 months, with a long-term target of over 3,000 locations. To combat higher costs due to food inflation and wage pressures, the company has raised prices on some products, including its iconic sausage roll, now priced at £1.30.

Greggs’ evening trade remains a bright spot, with evening sales accounting for 9 per cent of company-managed shop sales by the end of last year. Additionally, the company’s rewards app is seeing increased usage, with customers using it in 20 per cent of transactions, compared to 12.5 per cent in 2023.

While Greggs remains confident in its long-term growth prospects, analysts have raised concerns about its ability to meet consensus forecasts for a 3.5 per cent like-for-like sales growth this year. Panmure Liberum analyst Ben Hunt stated that to achieve this, Greggs would need to average a challenging 3.9 per cent growth across the remaining 43 weeks of the year. This uncertainty has contributed to a cool reception from investors despite the company’s robust annual performance.