ii view: Greggs cautious on profit outlook in 2026

Fourth-quarter (Q4) and Full-Year (FY) trading update to 27 December

• Q4 managed like-for-like sales up 2.9%
• Q4 total sales up 7.4%
• FY total sales up 6.8% to £2.15 billion
• FY company managed like-for-like sales up 2.4%
• Net cash held of £47 million, down from £125 million at the end of 2024

Guidance:

• Expects FY 2026 profit similar to 2025

Chief executive Roisin Currie said:

"We made good progress in 2025, in a challenging year where subdued consumer confidence impacted the food-to-go market. Against this backdrop, I'm pleased that Greggs outperformed the wider market and increased its market share of visits.

"We enter 2026 with a strong pipeline of new opportunities to make Greggs even more convenient for customers. This is underpinned by the investments we have been making in our supply chain capacity, which start to become operational this year. Our ongoing focus on efficiency allows us to deliver exceptional value to customers who are managing their budgets carefully."

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ii round-up:

Greggs (LSE:GRG) has flagged expectations for 2025 profit that match City forecasts, although with the food-on-the-go retailer expecting little improvement in profit this year given consumer headwinds.

Fourth-quarter same-store sales up 2.9% was better than the 1.5% reported the prior quarter, helping push total group sales for 2025 up 6.8% to £2.15 billion. The City currently expects 2025 pre-tax profit of around £173 million, with 2026 profit prior to this latest update expected to rise to around £176 million.

Shares in the FTSE 250 company fell around 3% in post update trading having fallen by close to two-fifths in 2025. The FTSE 250 index has risen 9% over the last year, while fellow food-on-the-go retailer WH Smith (LSE:SMWH) fell by close to half in 2025.

Alongside consumer headwinds, Greggs also highlights costs from its expanding supply chain operations as pressuring profits in 2026. A new supply facility in Derby is due to open in the middle of the year.

The seller of items including sausage rolls, pizzas and iced drinks opened an average of four new stores per week during 2025 - 207 new stores and 86 closures gave a total of 2,739 shops in late December.

Greggs expects a similar expansion of store numbers this year, with management previously flagging a target of more than 3,000.

Group net cash held of £47 million as of late December fell from £125 million at the end of 2024.

Broker UBS reiterated its ‘buy’ rating on the shares post the update. Annual results are due on 3 March.

ii view:

Started in 1939 and headquartered in Newcastle, Greggs today employs over 30,000 people. The retailer, whose outlets now include drive-thru stores, began a transformation from bakery to food-on-the-go retailer in 2013. Products are today predominantly made in centralised bakeries and distributed. Group strategy includes an expansion of digital sales such as click & collect and delivery via Just Eat Takeaway.com NV (EURONEXT:TKWY) and Uber Technologies Inc (NYSE:UBER). Competitors include Marks & Spencer Group (LSE:MKS) and McDonald's Corp (NYSE:MCD).

For investors, unchanged personal tax allowances effectively see more consumers paying tax, with others pushed into the higher rate tax bracket. Cost headwinds include those from an expanding supply chain as well as previously raised employee taxes. Extremes of weather have previously affected customer demand, while Greggs' geographical exposure is limited to just the UK.

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On the upside, numbers provided by Greggs suggest growth in market share, with ongoing product innovation likely contributing. An expansion of store numbers persists. Group capital expenditure is expected by management to ease in 2026, while growth initiatives include extending store opening hours and courting more digital related sales.

In all, potentially flat profits this year are reason for caution, and Greggs remains the most shorted UK stock. That said, a consensus analyst estimate of fair value above £19 per share and a forecast dividend yield of around 4% do at least give some reason for optimism longer term.

Positives:

• Value product offering
• Several growth initiatives

Negatives:

• Uncertainty economic outlook
• Lacks geographical diversity

The average rating of stock market analysts:

Strong hold