Greggs stock flopped by 15.5% to a near five-year low of 1,664.7p on Wednesday (2 July), after an unscheduled trading update warned profits would likely shrink this year.
The warning that operating profits could be “modestly below” 2024’s record year came alongside news that Greggs’ like-for-like sales had grown just 2.6% in the 26 weeks to 28 June.
Shares fell from 1,968p to close at 1,710p (–13.1%), following a slight recovery which persisted on Thursday to bring the price up slightly to 1,722p, though still down 12.5% on Greggs’ pre-update value.
Greggs put the slow like-for-like sales performance down to June’s hot weather, which reduced overall footfall after a positive month of trading in May.
“Greggs is telling porkies,” said Dan Coatsworth, investment analyst at AJ Bell, suggesting that the UK had “only a few days of the temperature being uncomfortably high”.
“In general, the past few months have been glorious weather-wise and that should have driven more people onto the high street.”
Coatsworth suggested Greggs should have seen its product mix change, with greater demand for salads and cold drinks counteracting any drop in hot pastry sales.
“Overall, Greggs should have still benefited from the sunshine. It begs the question of whether Greggs is simply using the weather as a reason to mask bigger problems.”
Like-for-like sales’ weak growth – especially considering price rises in January and May – was analysts’ primary concern. Investec calculated that volumes must have fallen at the bakery, given inflation of around 6%.
“We suspect like-for-likes are barely positive,” said Kate Calvert, Investec analyst.
Darren Shirley, consumer equity analyst at Shore Capital, echoed her view.
“We believe June’s like-for-like sales have been barely positive, so a mid-single-digit volume decline – a perfect storm for an integrated manufacturer/retailer,” he said.
With trading momentum weak, just as the bakery invests considerably in refurbishments in H1, Shirley forecast no EPS growth over the next three years, adding Greggs stock would “tread water”.
Calvert added that any restoration of confidence would consequently have to come from positive like-for-like volumes, though she was optimistic that Greggs was currently undervalued with “longer-term growth potential” and “attractive” cash generation.
Ben Hunt, analyst at Panmure Liberum, was less positive and said Greggs might struggle to find renewed momentum thanks to the “limited traction” of its strategic initiatives like evening trading and delivery.
“Rising cannibalisation risks,” he added, “mean that delivering sustained volume growth required to offset elevated cost headwinds will be challenging.”
Coatsworth said: “Even though Greggs continues to open new stores and talk up opportunities, on a like-for-like sales basis it is having to work extra hard to make progress.”
He noted shares had been weak since September 2024’s high of around 3,150p, as investors asked if the market had reached “peak sausage roll”.
“The latest trading update is only going to add to market fears.”
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