ii view: Greggs shares rise on improving sales

Trading update for first 20 weeks of 2025 to 17 May

• Total sales up 7.4% to £784 million
• Company managed like-for-like store sales up 2.9%

ii round-up:

Greggs (LSE:GRG) today pointed to improving sales as the food-on-the-go-retailer maintained hopes for the full year 2025. 

Product innovation helped same store sales for its managed outlets rise 2.9% during the 20 weeks to mid-May. That’s up from a gain of 1.7% during the first nine weeks of the year, with the improved performance supported by better trading conditions.

Shares in the FTSE 250 company rose 6% in UK trading having come into this latest update down by more than a quarter year-to-date. That’s in contrast to a near 2% gain for the FTSE 250 index itself. Newsagent and fellow food-on-the-go retailer WH Smith (LSE:SMWH) is down by a tenth over that time.

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Total sales for Greggs, including a net new opening of 20 stores to 2,638 stores, rose 7.4% to £784 million. The retailer continues to expect a net new opening of between 140 and 150 stores in 2025. 

Ice drinks, now available in 1,300 stores, performed well during the period. So did Pizzas and other hot food options such as chicken goujons and potato wedges. 

Made-to-order items including chicken burgers and fish finger sandwiches are now available in over 300 stores, with hot food now also including the recently launched Mac and Cheese product, which has been well received on Tik-Tok. 

Investments to increase supply chain capacity remain on track and include the building of a new frozen product manufacturing facility Derby. 

Management expectations for cost inflation, and driven by items such as increased National Insurance contributions, remain at around 6%, with product price increases previously made largely expected to cover. 

First-half results are scheduled for 29 July. 

ii view:

Founded in 1939, Greggs started its a transformation from bakery to food-on-the-go retailer back in 2013. Today, products are now predominantly made in centralised bakeries. Group strategy includes growing the store portfolio over time to significantly more than 3,000 UK stores, increasing digital related sales such as click & collect and delivery via Just Eat and Uber Eats, as well as investing in supply chain production and logistics.  

For investors, pressured consumer spending and the ongoing threat of a global trade war cannot be ignored. Previous costs pressures for items such as electricity are being added to by increases in staff NI contributions. Other food-on-the-go companies such as McDonald's Corp (NYSE:MCD) are not standing still, while Greggs geographical exposure is limited to just the UK.   

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On the upside, same store sales have improved during this latest period, with UK economic growth surprising to the upside and signed US and EU trade deals potentially supporting consumer sentiment. Group growth initiatives include expanding store numbers and improving capacity and logistics. Product innovation and relatively new categories such as pizza are being aided by ideas like extended opening hours and digital initiatives, while a forecast dividend yield of over 3% is not to be ignored. 

For now, and while risks clearly remain, an consensus analyst estimate of fair value above £23 per share, appears to point to current optimism within the City. 

Positives: 

• Value product offering
• Several growth initiatives 

Negatives:

• Uncertainty economic outlook
• Lacks geographical diversity

The average rating of stock market analysts:

Buy