Shares of British baker and fast-food chain Greggs rose 11.5% to 1,790p on Wednesday, topping the FTSE mid-cap index, after the company reaffirmed its full-year profit guidance despite a slowdown in underlying sales growth during the third quarter.
By 9:10 am, the stock had given up some of the gains and was higher by about 7%.
The chain, known for its sausage rolls, steak bakes, vegan alternatives and sweet treats, said like-for-like sales at its company-managed shops increased 1.5% in the 13 weeks to September 27, down from 2.6% growth in the first half of the year.
Total sales for the quarter climbed 6.1%.
“While unusually high temperatures persisted throughout July, which held back performance during the month, trading improved in August and September in more stable conditions,” Greggs said on Wednesday.
Profit guidance maintained but analysts question cut to store-opening expectations
Greggs said its board’s expectations for the full-year outcome remain unchanged, reassuring investors who had worried about slowing sales and rising costs.
Analysts at Jefferies described the update as encouraging, noting they expect like-for-like sales to accelerate into the fourth quarter.
They, however added that the UK bakery chain’s cut to store-opening expectations this year will likely add to concerns that Greggs has reached its maximum growth potential even though they said they did not agree with this narrative.
Greggs now expects to open around 120 net new shops in 2024, down from earlier guidance of 140 to 160.
The chain has opened 57 net new shops year to date, with roadside locations outperforming city centre outlets.
“Greggs’s slower shop rollout will continue to be a concern, even though the UK bakery chain said its pipeline of openings remains strong into next year,” said RBC Europe analyst Ross Broadfoot.
The group has guided in line with consensus for this year of about 187 million pounds, but Broadfoot said the lowered guidance will involve further small downgrades for many.
Price increases to be introduced amid inflation
Chief Executive Roisin Currie told Reuters the company would raise prices on a limited number of products this week, marking the first adjustment since May.
“It will be a small number of products, a small amount, and we will be landing that this week,” she said.
The move comes as UK grocery inflation stood at 4.9% in September, according to data from market researcher Worldpanel, putting further pressure on consumer spending.
Market reaction and investor sentiment
Despite Wednesday’s surge, Greggs’s shares remain down about 39% this year, reflecting investor unease about slowing sales growth and speculation that the chain may have reached “peak Greggs” given its already substantial store footprint across the UK.
The company has pushed back against that view, pointing to opportunities in new formats and roadside expansion.
While official figures showed British consumers spent more in August, retailers remain cautious ahead of the government’s budget on November 26, where speculation of tax rises and a weakening jobs market could affect trading in the crucial festive period.
Greggs’s ability to stabilise performance in the coming quarter, while managing costs and store expansion prudently, will be closely watched by both analysts and investors.
The post Greggs stock soars on profit guidance, but analysts split on growth appeared first on Invezz