Greggs reported full-year revenue up 11.3% to £2.0bn, with life-for-like (LFL) sales in company-managed shops rising 5.5% (6.3% expected). Revenue growth was driven by 145 net new shop openings, and increases in prices and volumes. Underlying profit before tax was up 13.2% to £189.8mn (£187.2mn expected).
Free cash flow of £97.0mn was down from £122.1mn the prior year, the difference largely due to increased investment.
LFL sales are up 1.7% in the first nine weeks of 2025, challenged by weather conditions. Cost inflation of around 6% is expected for the year.
The board has proposed a final dividend of 50.0p, up from 46.0p in the previous year.
Management remains confident that Greggs can manage inflationary headwinds this year. Current consensus points at revenue growth of 8.7% to £2.2bn for 2025.
The shares fell 9.2% in early trading.
Our view
Markets haven’t taken too kindly to Gregg’s 2024 full year results as the bakery giant flagged slowing growth in the new year. Bad weather’s been partly to blame. But while the Group’s proved a dab hand at managing rising input prices, guidance of 6% cost inflation this year raises valid questions about the profit outlook in the context of a challenging environment.
The market disappointment is in part because such a high bar has been set, a testament to the job management has done over the past year or so.
The number of shops is set to rise to 3,000 over the next few years with 140-150 net openings planned for 2025, the menus and stores have been reset, and market share is at an all-time high. Relying on high-street shoppers and commuter traffic isn't sustainable, so we're particularly supportive of plans to increase its presence at travel locations.
Greggs has worked hard over the last few years to increase the number of franchised shops to around 20%. We're supportive of this model. Compared to the company-owned sites, these locations aren't on the hook for day-to-day costs.
Greggs continues to try new growth initiatives including bolstering delivery services and opening later to attract more evening customers. Just under half of Greggs shops now serve until 7pm or later, and with new hot food being trialled this year, they’re giving customers more reason to visit them throughout the day.
One of Greggs' key strengths is that it's a lower-value treat. That makes it more resilient during spells when incomes are being flexed. Leaning into that through the loyalty app, there’s now another valuable avenue to drive sales growth.
The cost picture has taken a turn in recent months following the UK Budget where changes to company taxes are set to rack up costs in the tens of millions. Managing costs in 2025 is going to be a key challenge.
The growing dividend is an added attraction, though nothing is guaranteed. The cash hoard on the balance sheet is expected to be flexed to cover increased growth investment, but that’s precisely what it’s there for.
We continue to be impressed and there's a lot to like about Greggs’ proposition, including its list of growth drivers. Slowing sales momentum and cost challenges are reflected in a valuation that’s come under pressure. We think this presents a better opportunity than there’s been for some time, but would caution that the near term looks uncertain.
Environmental, social and governance (ESG) risk
Consumer services companies are medium-risk in terms of ESG, and very few companies are excelling at managing them. That leaves plenty of opportunity for forward-thinking firms. The primary risk-driver is product governance. The impact of their products on society, labour relations and environmental concerns are also key risks to monitor.
According to Sustainalytics, Greggs’ management of material ESG issues is strong.
Greggs’ overall ESG reporting is not up to par with leading reporting standards, though it has appointed a board-level responsibility for overseeing ESG issues. A very strong environmental policy and a decent whistleblower programme are in place. Executive-level compensation could benefit from some elements being explicitly linked to sustainability performance targets.
Greggs key facts
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