Greggs’ sales growth slows in ‘challenging’ UK market

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By James Davey

LONDON (Reuters) -British baker and fast food chain Greggs maintained its full year outlook, though its underlying sales growth did slow in its latest quarter, reflecting a “challenging” market and sending its shares lower.

The stock was down 3% in morning trading on Tuesday, paring 2024 gains to 18%.

Chief Executive Roisin Currie highlighted recent surveys showing UK consumer confidence had plunged in the wake of Prime Minister Keir Starmer’s warnings about the state of the British economy and the likely need for tax increases in an Oct. 30 budget.

“That’s just the uncertainty out there. When there’s any switch in political regime people are just unsure what the future might bring,” she told Reuters in an interview.

“We win in that market because people are still seeking value,” she said.

Greggs, famous for its sausage rolls, steak bakes and vegan alternatives, has proved a resilient performer through Britain’s cost-of-living crisis.

It said company-managed shop like-for-like sales rose 5.0% in the 13 weeks to Sept. 28, its fiscal third quarter, having been up 7.4% in the first half.

Currie said unhelpful weather in July and riots in August weighed on sales. September was, however, a stronger month, and she is optimistic Greggs will have a better fourth quarter.

“While there’s uncertainty, there’s also lots of reasons to be confident,” she said, noting rising wages, falling inflation and still high employment.

Currie said Greggs has no plans for further price rises in 2024.

As well as new stores, Greggs’s growth is being supported by an expansion of its product range, such as new pizza and doughnut options, longer opening hours into the evening, increased sales through deliveries and building loyalty with the Greggs App.

So far this year, it has opened a net 86 shops, including 43 relocations, taking the total to 2,559 shops. In May, Greggs said it was building capacity for a store estate of around 3,500.

“Whilst acknowledging ongoing economic uncertainty, the Board expects the full year outcome to be in line with its previous expectations,” Greggs said.

Prior to Tuesday’s update analysts were on average forecasting a 2024 underlying pretax profit of 187 million pounds, according to LSEG data, up from 168 million pounds in 2023.

(Reporting by James Davey; editing by Sarah Young and Paul Sandle, Kirsten Donovan)