Greggs shares slump as UK bakery chain warns of lower 2025 profit

British bakery chain Greggs saw its shares slump 13.7% after warning full-year operating profit could be modestly below 2024's results, attributing the revised guidance to unusually hot UK weather that dampened June sales and overall footfall. Despite a 6.9% rise in first-half total sales to £1.03 billion, the company anticipates a decline in H1 operating profit, partly due to store refurbishments. The profit warning contrasts with prior analyst forecasts of £198.5 million for 2025, though some analysts maintain optimism regarding Greggs' long-term prospects.

Analysis

Greggs (LON:GRG) experienced a significant 13.7% share price decline following a profit warning for the full year. The company now anticipates operating profit will fall modestly below the £195.3 million achieved in 2024, a notable reversal from prior analyst consensus forecasts of £198.5 million. Management directly attributes this downgrade to an unusual UK heatwave, which dampened customer footfall and like-for-like sales in June. This external factor overshadowed otherwise solid top-line growth, with total sales rising 6.9% to £1.03 billion in the first half and like-for-like sales up 2.6% over the same period. The company also flagged that first-half profitability is being impacted by costs associated with store refurbishments and the phasing of cost-saving initiatives. Despite the market's severe reaction, commentary from Jefferies suggests the setback is not a reflection of the business's underlying health, presenting a view that these headwinds may be transient rather than structural.

Key Decisions for Investors

• Investors should assess if the 13.7% share price slump presents a buying opportunity for a fundamentally resilient business facing temporary, weather-related headwinds, as suggested by some analysts.
• Monitor upcoming trading updates closely to determine if the June sales weakness was an anomaly or the beginning of a broader trend, paying attention to footfall recovery as weather normalizes.
• Consider the near-term margin pressure from store refurbishments and cost timings against the positive signal of continued top-line growth, as evidenced by the 6.9% increase in H1 total sales.