Greggs PLC H1 Sales Rise; Sees Lower Operating Profit In H1, FY25

Greggs Plc reported a 6.9% increase in first-half total sales to £1.03 billion and 2.6% like-for-like sales growth, yet expects H1 operating profit to be lower year-over-year and fiscal 2025 operating profit modestly below the prior year. This revised profit outlook stems from challenging current trading conditions, including slower June growth due to high temperatures impacting footfall, despite the company's ongoing shop expansion efforts.

Analysis

Greggs Plc has issued a downward revision to its profit forecast, overshadowing positive top-line growth in its first-half trading update. While total sales increased by 6.9% to £1.03 billion and like-for-like sales in company-managed shops grew 2.6%, this momentum decelerated significantly in June. The company explicitly attributes this slowdown to very high temperatures, which reduced overall footfall despite boosting cold drink sales, highlighting a vulnerability to weather-sensitive consumer behavior. Consequently, the Board now anticipates that first-half operating profit will be lower than the prior year and, more critically, that fiscal 2025 operating profit could be modestly below the prior year's result. This guidance reflects the impact of current trading conditions, stronger comparative figures from the previous year, and the phasing of cost initiatives. Despite these near-term profitability headwinds, the company's long-term physical expansion strategy remains on track, with 31 net new shops opened in the period and a target of 140 to 150 for the full year.

Key Decisions for Investors

• Investors should focus on the downward revision to fiscal 2025 operating profit guidance, as this profit warning is the primary catalyst likely to drive near-term stock performance, superseding the positive H1 sales figures.
• The sensitivity of footfall to June's high temperatures introduces a significant variable; monitor consumer retail data and weather patterns for indications of a recovery or continued weakness in the second half.
• The upcoming interim results on July 29 will be critical for understanding the magnitude of margin pressure and management's ability to execute on its cost recovery initiatives.
• Consider the divergence between the challenged near-term profit outlook and the intact long-term growth strategy of network expansion, which may appeal differently to short-term traders versus long-term holders.