FACTOR Analysis for Greggs PLC (LSE: GRG) – July 2025
F – Financials
- Revenue for the first half of 2025 reached £1.03 billion, representing a 6.9% increase year-on-year, with like-for-like sales up 2.6%.
- H1 2025 operating profit is expected to be lower than the same period in 2024, and full-year operating profit is now forecast to be modestly below the record £204 million achieved in 2024.
- Earnings per share (TTM) stand at £1.50.
- The annual dividend for 2025 is set at 69p per share, yielding 3.97%.
- The company maintains a debt/equity ratio of 0%, indicating no gearing concerns.
- The stock closed at 1,702.67p on July 9, 2025, down over 38% from its 52-week high and just above its recent low.
A – Advancement Drivers
- Greggs opened 87 new shops (31 net) in the first half of 2025 and is on track for 140–150 net openings for the year, with most new stores planned for the second half.
- The company has expanded its iced beverage range and continues to refresh its menu to adapt to changing consumer demand, especially during periods of extreme weather.
- Operational investments include 108 refurbishments completed in the first half, with about 50 more planned for the second half, and the launch of a new Eco Drive-Thru as a sustainability initiative.
- There is an ongoing focus on evening and delivery channels, though growth in these areas remains limited.
- Cost inflation is running at approximately 6% like-for-like, with management pursuing procurement and operational efficiencies.
C – Competitive Landscape & Sector Outlook
| Competitor | Focus/Strengths | Greggs Positioning |
|---|---|---|
| Tesco, Sainsbury’s | Food-to-go, convenience | High street and travel hub presence |
| McDonald’s, Pret | Fast food, premium coffee | Value, bakery, and breakfast/lunch dominance |
| Cooplands, Local bakers | Regional bakery chains | National scale, menu innovation |
The UK food-to-go market remains robust but is sensitive to weather and consumer confidence. Cost inflation and wage pressures persist, but Greggs’ value offering is a competitive advantage. The market remains competitive, with continued expansion from supermarkets and quick-service restaurant rivals. Greggs’ sustainability initiatives and refurbishment programme support long-term positioning.
T – Target Price (Valuation & Forecast)
| Scenario | 12-Month Target | Key Drivers |
|---|---|---|
| Bear | 1,500p | Prolonged weak footfall, persistent cost inflation, weak H2 recovery |
| Base | 2,000p | Normalized weather, steady like-for-like sales, cost mitigation |
| Bull | 2,400p+ | Strong H2 bounce, margin recovery, digital/delivery gains |
The company’s P/E (TTM) is 11.39, with a 2025 estimated P/E of 12.9. The dividend yield is 3.97%. Shares are near 52-week lows, potentially offering value if trends improve in the second half of the year.
O – Obstacles
- Weather sensitivity, with the record heat in June 2025 sharply reducing demand for core bakery products and footfall.
- Persistent inflation in ingredients, energy, and wages, with nearly £100 million in extra costs from higher National Insurance contributions.
- Rapid store expansion may dilute like-for-like sales growth.
- Evening and delivery initiatives have yet to deliver meaningful incremental growth.
- Recent profit warning and share price drop may deter momentum investors.
R – Recommendation
Hold/Accumulate for Value and Dividend Yield
The recent share price drop reflects a weather-driven shortfall rather than a structural decline. Greggs remains financially robust, with strong cash flow, no debt, and a nearly 4% dividend yield. Store expansion, menu innovation, and sustainability investments offer long-term growth levers, while cost pressures are being actively managed. Investors should monitor second-half like-for-like sales trends, cost inflation, and the success of digital and delivery initiatives. Greggs is suitable for income and value-focused investors seeking UK consumer exposure, though near-term volatility should be expected.
Summary: Greggs’ fundamentals remain sound despite short-term weather and cost headwinds. The business is well placed for recovery and long-term growth, with the current share price offering an attractive entry for patient investors.
References:
- Greggs H1 2025 Trading Update
- Company Annual Report 2024
- LSE Market Data (July 2025)
- Consensus Analyst Estimates
- Financial Times, July 2025
- Bloomberg Terminal Data
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