4th Mar 2025 10:22
(Alliance News) - Greggs PLC on Tuesday backed guidance despite reporting a slow start to 2025, upcoming inflationary headwinds and a margin dent from investment plans.
"Looking ahead to 2025, the macroeconomic landscape remains tough. Inflation remains elevated, and many of our customers continue to worry about the cost of living. After years of financial anxiety, they are still facing concerns about energy prices and increased mortgage and rent costs," the company said in a statement.
The Newcastle upon Tyne-based bakery chain said pretax profit rose 8.3% to GBP203.9 million in the 52 weeks to December 28 from GBP188.3 million a year prior, or by 13% on an underlying basis, excluding exceptional items, to GBP189.8 million from GBP167.7 million.
Sales increased 11% to GBP2.01 billion in from GBP1.81 billion a year prior, with like-for-like sales in company-managed shops up 5.5% year-on-year.
But LFL growth slowed to just 1.7% year-on-year in the first nine weeks of 2025, Greggs said.
"Challenging weather conditions in January followed by improved trading in February," the firm added.
Despite this, Greggs said it is confident it can manage inflationary headwinds, noting increases in employers' national insurance contributions, and deliver another year of progress in 2025.
Greggs expects overall input cost inflation in 2025 to be around 6%.
In response, shares in Greggs were 12% lower at 1,839.22 pence each in London on Tuesday morning.
Chief Executive Roisin Currie commented: "In 2021, we set our sights on doubling sales by 2026 and having a significantly bigger business over the longer term. Three years into this five-year plan, sales are on track and we continue to be confident in the growth opportunity in front of us."
Greggs is targeting 140 to 150 net store openings in 2025 and continues to see the opportunity for "significantly more" than 3,000 UK shops over the longer term.
At December 28, Greggs had 2,618 shops open.
But the margin will take a short-term hit, the firm said, reflecting investments in a new frozen manufacturing and logistics facility in Derby, due to open in 2026, and a new national distribution centre in Kettering, due to open in the first half of 2027.
Greggs said the additional fixed costs associated with the Derby site are expected to present a roughly 40 basis point headwind to operating margin in 2026. A similar additional margin headwind is expected in 2027 as these costs annualise and the Kettering site opens, it added.
In 2024, underlying operating profit margin rose to 9.7% from 9.5%.
Chief Financial Officer Richard Hutton said the "significant investments" will support further profitable growth but will create short-term return on capital employed and margin headwinds.
"However, this capacity will enable Greggs to realise the medium-term opportunity to grow its estate and expand into new channels, continuing the strategy that has been so successful in recent years. Throughout this we will maintain a strong financial position and the discipline that has delivered profitable growth and excellent capital returns, to the benefit of all of our stakeholders," he added.
Greggs raised the full-year dividend by 11% to 69.0 pence per share from 62.0p.
By Jeremy Cutler, Alliance News reporter
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