Greggs: Rolling With Greggs

Greggs ranks as the UK’s leading food-to-go brand, with value positioning sustaining volumes even as budget-conscious consumers trade down, helping total H1 sales grow 7% despite weather headwinds. The brand remains a motorway-service favorite and everyday convenience choice, underpinning steady like-for-like sales in managed and franchised shops and supporting dividend continuity while investment continues.

Net 31 new shops in H1 lifted the estate to 2,649, while evening remains the fastest-growing daypart at 9.3% of managed shop sales, broadening occasions and mix resilience. Expansion into drive-thru, convenience, and partnerships (e.g., frozen “Bake at Home” availability extending via Tesco in September) adds reach and at-home relevance without heavy marketing spend.

A new Derby frozen production/logistics site (H1 2026) and Kettering National Distribution Centre (H1 2027) aim to increase capacity and upstream automation, enabling circa 700 additional shops to be serviced. This underpins longer-term growth, supports consistent availability, and should help mitigate cost and volatility once live, even as near-term OpEx and CapEx weigh on profit.

• Trading Update Color: Any post–interim trading commentary on footfall and weather normalization could reset expectations for H2 profitability and momentum. A clearer trading tone can shift near‑term sentiment and earnings assumptions quickly.

• Retail Partnerships: Early read‑through from Tesco's expansion of "Bake at Home" signals at‑home demand, potential incremental revenue channel effectiveness in Q3/Q4. Confirmation of repeat purchases would validate a low‑cost growth lever beyond shops.

• Peak Season Trading: Holiday and winter trading mix, plus evening contribution, informs elasticity and value proposition durability into FY2025 close and FY2026 entry. Strong seasonal performance would show the brand holds share even when budgets are tight.

• Cost Curve Signals: Evidence of easing input or labor cost pressure could boost operating margin trajectory against cautious guidance baselines. Small improvements in costs can meaningfully lift profits in a high‑volume environment.

• Derby Go‑Live: Increase efficiency of operations in H1 2026 should enhance frozen capacity, availability, and unit economics, supporting estate growth. More capacity supports more stores and better availability, compounding sales over time.

• Kettering NDC: H1 2027 launch to service ~700 additional shops via automated upstream picking, enabling scale and efficiency at the national level. Modern logistics can cut costs and improve consistency, strengthening long‑run margins.

H1 trading was hit by heavy snow/wind in January and unusual heat in June, dampening like-for-like growth and pressuring operating leverage; recurrence could keep profit growth subdued. Management cites challenging market footfall and cost phasing, underscoring limited short-term flexibility despite strong brand equity.

Ingredient, wage, and energy costs remain a watch item, with management indicating full-year operating profit could be modestly below 2024, reflecting headwinds and investment timing. Lower interest income from cash deployment also trimmed earnings, a near-term drag until capacity efficiencies land.

The pathway to more than 3,000 shops and new distribution capacity relies on timely delivery of Derby (H1 2026) and Kettering (H1 2027); delays or ramp hiccups could slow sales growth and margin recovery. Estate quality and site selection discipline remain crucial to protect returns as formats and locations diversify.