Greggs backs full-year outlook but Q3 sales growth slows

Greggs slumped on Tuesday as it backed its full-year outlook but reported a slowdown in third-quarter sales growth.

In the 13 weeks to 28 September, total sales at the bakery chain rose 10.6% compared to 13.8% growth in the first half. Managed like-for-like sales were up 5% compared to the same period a year earlier, versus 7.4% growth in the first half.

Greggs said sales were supported by "menu development and further progress in extended trading hours and new digital channels".

The company has opened 86 net new shops in the year to date and is on track to open between 140 and 160 net new shops in 2024, including around 50 relocations.

"Greggs continues to extend its reach, bringing new shops closer to customers and establishing the supply chain capacity to support further growth," it said.

"With increased forward buying cover we now expect the overall level of cost inflation for 2024 to be towards the lower end of the 4-5% range previously communicated. At a time when consumers continue to face uncertainty Greggs offers exceptional value for money.

"Whilst acknowledging ongoing economic uncertainty, the board expects the full year outcome to be in line with its previous expectations. The board remains confident in the long-term growth opportunity for Greggs, and we are investing to support that growth."

At 0920 BST, the shares were down 3% at 3,030p.

Russ Mould, investment director at AJ Bell, said: "Greggs has pursued multiple avenues to achieve growth in recent years, including home delivery, evening trading and a successful move into vegan products, but there are some signs in its latest update that it may need to pull another rabbit out of the hat.

"While like-for-like growth of 5% is nothing to sniff at against a tricky backdrop it does represent a material deceleration for Greggs. When you add in the shares’ strong run over recent times, it is not entirely surprising to see a bit of market disquiet.

"The company is not resting on its laurels. It continues to innovate in terms of its product range and it is also pressing ahead with its ambitious store roll-out programme. The nagging question for investors is when does Greggs hit saturation point?

"Greggs’ heavy investment in infrastructure to support further outlets suggests it sees continuing scope for growth for some time to come, and an excellent track record going back decades means it is likely to be afforded some trust by shareholders. However, achieving the scale of expansion which Greggs has outlined will not be easy and there could be some speed bumps along the way."

Jefferies, which rates the stock at ‘buy’, said: "A solid update from Greggs with the marginally softer LFL trend being offset by an improved cost outlook and a stronger exit rate.

"While we note limited Q3 volume growth, we expect little change to consensus today, and retain our positive stance."