Greggs surges but performance not quite as yummy as it looks, say analysts

Greggs PLC (LSE:GRG) shares jumped 6.8% to 2,136p on Tuesday but analysts said the improved growth in recent week was not as good as it looked under the lights of the heated display cabinet.  

The 2.9% growth in the second quarter, up from 1.7% in the first, is only positive "on the surface", said analysts at Peel Hunt.

This is because it still implies that sales volumes are declining, they added, with the price increases of up to 4% the bakery chain pushed through back in December and further increases in recent weeks.

"This may come as a slight disappointment to the market, given weather conditions were highly favourable over the period," the analysts said, observing that lower-income customers seem to be struggling.

Greggs also pushed through further price increases of up to 2% over the period to offset cost-base pressures.

"This does further erode the brand's value credentials, which puts more pressure on volumes in the medium term, in our view," the Peel Hunt team added.

But Ben Hunt at Panmure Liberum estimated that volume growth has "shifted from negative in the first nine weeks to slightly positive", with shop footfall aided by favourable weather.

He kept a 'sell' rating on the shares, though.

Analyst Clive Black at Shore Capital felt it was "only a steady update" and "may do little for the share’s upward momentum near term given the clement weather".

"We had felt that improved footfall may have driven slightly stronger same-store sales, say c4%," he said. 

With Greggs having added a net 20 stores, making for an estate of 2,638 at May 2025, the group said its pipeline is set to deliver 140-150 net new outlets in the financial year and management has spoken about an aspiration for 3,500-plus.

But Black said he was asking himself the question of "when peak-Greggs may emerge" and noted that "with many examples of over-expansion evident in UK retail (e.g., B&M and Poundland)" he wondered whether or not management "will foresee and embrace the opportunity of maturity in terms of sweating assets" to elevate returns and "focusing upon free cash generation that may be deployed in a different manner to that adopted for some years now; a big question".

While he retained a 'buy' rating on the shares he did not sound wholly convinced, saying this was despite "the current rather muted same store momentum, big projects to deliver, and that peak question means that it is not tasting just quite so yummy to us".

Shares in Greggs had fallen to a two-and-a-half-year low last month, below 1,800p, but had been on the rise in the run-up to the trading update. 

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