Greggs holds full-year guidance as new year trading stays steady

Greggs left full-year profit guidance unchanged after like-for-like sales rose 1.6% in the first nine weeks of 2026 (total sales +6.3% in that period). For 2025 underlying profit before tax fell 9.4% to £171.9m on total sales of £2.15bn (+6.8%); company-managed shop LFLs rose 2.4% and the estate grew by 121 net openings to 2,739 sites. Management is targeting ~120 net openings in 2026, expects capex to fall from £287.5m in 2025 to ~£200m in 2026 (then £150-170m from 2027) to allow future cash returns, and held the total ordinary dividend at 69.0p (final 50.0p).

Analysis

Market structure: Greggs (GRG.L) benefits from share gains vs independents and footfall-dependent competitors through a 120-shop net opening target for 2026 and clear runway to >3,000 stores; evening and delivery growth (evening 9.4% of sales, delivery 6.8%) points to diversification of dayparts that supports pricing resilience if input costs decline. Cost pressure has compressed margins (underlying PBT -9.4% in 2025) so easing inflation is the key supply-side variable; commodity (wheat/dairy) and wage trajectories will directly set margin recovery timing.

Risk assessment: Tail risks include a consumer-spending shock (CPI rebound >+1ppt YoY or UK real wages falling further), a commodity price spike, or rollout misexecution leading to impairments; any one could erode EBITDA by >10-15% within 12 months. Near term (days–weeks) expect muted equity moves; short term (3–9 months) margin recovery tied to CPI prints and delivery scale; long term (2027+) material free cash flow upside if capex falls to £150–170m enabling buybacks/dividend increases.

Trade implications: Core trade is selective long exposure to GRG.L sized 2–3% of portfolio on pullbacks >5% with 12-month target IRR 12–18% and stop-loss at -12%. Pair trade: long GRG.L (2%) vs short Domino's Pizza Group DOM.L (1.5%) over 3–9 months to play retail-led daytime resilience vs delivery-focused peers. Use options: buy a 9-month call spread on GRG.L (ATM to +15%) sized 0.5–1% notional to cap cost and sell 30–60 day covered calls to monetize upside while holding stock.

Contrarian angles: Market may be underpricing post-2026 cash flow optionality — capex falling from £287.5m to ~£200m then £150–170m implies incremental annual FCF potential of £50–100m by 2027, enough for meaningful buybacks/dividend hikes. Conversely, consensus may underappreciate cannibalization and real-estate execution risk if openings accelerate; watch app penetration (26.7% scans) as a leading KPI for visit frequency and LFL sustainability.

Key Decisions for Investors

• Consider establishing a 2–3% long position in Greggs PLC (LSE:GRG) on any pullback >5% within the next 4–8 weeks; target 12-month total return 12–18% and set an initial stop-loss at -12% to limit downside risk.
• Initiate a pair trade: long GRG.L (2% portfolio) and short Domino’s Pizza Group (LSE:DOM) at 1.5% to exploit Greggs’ daytime/evening diversification vs delivery-led peers; hold 3–9 months and trim if the relative performance gap exceeds 5%.
• Buy a 9-month GRG.L call spread (ATM buy / +15% sell) sized 0.5–1% notional to gain asymmetric upside while capping premium; if already long, sell 30–60 day covered calls to monetize elevated app adoption and delivery momentum.
• Reduce exposure to sit-down UK casual dining/consumer discretionary names (e.g., trim Whitbread WTB.L exposure by 1–2%) over the next 3–6 months due to sustained margin pressure and higher fixed-cost leverage vs takeaway-led models.