Love it or hate it, you may have noticed more and more Greggs stores popping up in your local area, possibly at retail parks, roadside locations, or even inside supermarkets. The Newcastle-based food retailer is perhaps best known for its sausage roll, as well as a wider array of baked goods and sandwiches. However, in recent years it has expanded its offering to include pizza, flatbreads, rice bowls, fried chicken, and iced lattes. Its vegetarian and vegan menu has also increased, with the recent addition of the red pepper, feta, and spinach bake, following up on the success of the vegan sausage roll. However, as it continues to expand both its number of stores and sprawling menu, there are questions as to whether it can execute its growth strategy. Greggs shareholders have had a disappointing few months. After hitting a price of £31.84 per share in August 2024, a series of profit warnings and outlook downgrades have caused shares to dip under £16.00 in recent months.
In July, the company released its interim results covering the six months to 28th June 2025. While sales increased compared to the same period in 2024, with revenues up 7.0%, a combination of lower footfall and building cost overheads led to profit before tax falling 14.3% to £63.5m. This is expected to continue to persist through the year, with management indicating that operating profit could be modestly lower than the level achieved in 2024. CEO Roisin Currie attributed the results to weaker consumer sentiment as well as the adverse impact of the weather, though some investors are worrying that Britain has hit “peak Greggs”.
The weather does have a substantial impact on consumer behaviour, including the types of food people eat and where they choose to consume them. The inclement conditions this year will have likely reduced footfall to Greggs stores. The snow and wind in January may have persuaded many to stay at home, while the more recent heatwaves through June and August reduced appetites, particularly for hot flaky pastries. Though some of those sales would be redirected to Greggs’ renewed range of sandwiches and salads, these typically have a lower margin than the classic pastry range and so still lead to a drag on profits.
Costs inflation has also been a substantial driver of Greggs’ recent lacklustre performance. The company is guiding a total circa 6% cost inflation for 2025. The majority of its cost base is labour, food, and packaging. The recent increase in National Living Wage, as well as higher levels of employee National Insurance contributions, affects much of Greggs’ 33,000-person workforce. The company is anticipating an approximately 8.0% overall increase in wage and salary costs. While in recent years food and packaging inflation has been significant, management are seeing some signs of this cooling and are anticipating mid-single digits inflation for the year.
Due to the impact of rising costs, Greggs pushed through three price hikes in a twelve-month period between 2024 and 2025. Its sausage roll, which could be purchased for 85p in 2016, hit £1.30 earlier this year.
While the consumer environment has been challenging, Greggs has continued to pursue an aggressive store opening strategy. In the first six months of the year, it opened a net 31 stores and is targeting another 110-120 in the second half. With 2,649 stores at present, management see scope for 3,500 before hitting a saturation point. As well as new stores, the company is aiming to grow new routes to customers, including delivery through UberEats and JustEat and an upcoming trial of a new smaller scale shop format ‘bitesize Greggs’, which could allow the opening of stores in areas too small for a full service shop. Greggs has also announced new partnership with Tesco, and 800 of the supermarket’s largest stores will begin stocking Greggs ‘Bake at Home’ products in September 2025, in addition to its long-standing relationship with Iceland. Management claim that app data shows that the opening of new stores and introduction of new distribution channels does not heavily impact sales at other nearby stores, despite many Greggs opening in close proximity to one another. However, some investors remain concerned that the costs of expansion may continue to hurt earnings, especially if consumers begin to balk at price rises from the value retailer. There may come a point where the UK becomes saturated and loses appetite for more Greggs.
Please note that this communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned. Investments and income arising from them can fall as well as rise in value. Past performance and forecasts are not reliable indicators of future results and performance. The information and views were correct at time of publishing but may have changed at point of reading.