Sparks - Greggs

There is a clear message in Greggs’ H126 results of outperformance in a challenging market, with menu innovation, its value proposition and increasing distribution as key drivers in gaining share.

Revenue increased by 7.2% in H126 with like-for-like growth in company-managed stores at 2.1%. The company appears to have seen a modest improvement in like-for-like growth, with two-year growth rates improving from c 3% at the very start of the year to c 5% in H126.

H126’s strong operating profit growth of c 23% is attributed to the easy comparative from H125 (when operating profit fell by 8%), cost control, the phasing of cost inflation and the growth in the grocery business.

With respect to the outlook for the year, management is targeting 100–110 new net openings in 2025, as well as an additional 10 ‘Greggs Express’ convenience stores, which compares with the May 2026 trading update when 120 net openings were expected. In May, management also said it anticipated 3% underlying cost inflation for the year with higher inflation expected through the end of FY26 and into FY27. Today, cost inflation in H126 was quantified at 2.2%, lower than anticipated, with the expectation it would be around this level for the year as a whole. In addition to underlying cost inflation, H226 will see a step-up in operating costs as the new site in Derby goes live.

Management’s expectations for the year are unchanged.

The interim dividend is flat, which is consistent with our expectations of no growth in the dividend in FY26 and FY27 until earnings cover increases to 2x underlying earnings.