Greggs blames hot weather as it warns of 'modestly' lower profits

Greggs PLC (LSE:GRG) has issued a profit warning, forecasting full-year operating profit to be "modestly below" the £195.3 million recorded in 2024, primarily attributing the revised outlook to slowed sales growth in June due to hot weather. While first-half total sales increased 6.9% to £1.03 billion (2.6% like-for-like), the pace decelerated from earlier in the year as high temperatures reduced overall footfall. The company anticipates a lower first-half operating profit due to strong prior-year comparatives and refurbishment timing, though it expects second-half performance to benefit from cost mitigation and easier comparatives.

Analysis

Greggs PLC has issued a profit warning, now expecting full-year operating profit to be "modestly below" the £195.3 million achieved in 2024. The revision is attributed to a recent slowdown in sales growth, which management blames on high temperatures in June reducing customer footfall. While first-half total sales rose 6.9% to £1.03 billion, this represents a deceleration from the 7.4% growth seen in the first 20 weeks of the year, with like-for-like sales growth slowing from 2.9% to 2.6% over the same period. First-half profitability is also anticipated to be lower year-over-year, impacted by challenging prior-year comparatives and the front-loading of store refurbishments, with 108 refits completed in H1 versus approximately 50 planned for H2. Despite the downgrade, the company maintains a net expansionary footprint, adding a net 31 shops to reach 2,649, and anticipates an improved second-half performance driven by cost mitigation efforts and less demanding sales comparatives.

Key Decisions for Investors

• Investors should anticipate near-term negative pressure on the stock following the profit warning and downward revision of full-year guidance.
• Monitor upcoming trading updates closely to determine if the sales slowdown is temporary and weather-related, as management suggests, or if it signals a broader weakening of consumer demand.
• Evaluate the company's second-half performance, particularly the effectiveness of its cost mitigation plans and its ability to capitalize on easier comparatives to offset the weak first half.