Greggs shares drop on sales slowdown and cost inflation warning

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Shares in Greggs slumped by as much as 10 per cent on Thursday as the UK baker blamed weak consumer confidence for a slowdown in quarterly sales and warned of rising Budget-related costs.

The food-to-go retailer posted a 2.5 per cent rise in like-for-like sales in the last three months of the year, down from 5 per cent in the previous quarter, due to “more subdued high street footfall”, and weak consumer confidence in the run-up to Christmas.

Greggs said its trading performance reflected “a well-publicised more challenging market backdrop in the second half of 2024”. It also warned of “further overall cost inflation”, stemming from measures announced in last year’s Autumn Budget.

In November, Deutsche Bank predicted that Greggs would face an extra £97mn in costs over the next two years as a result of higher employers’ national insurance contributions and other government announcements, and downgraded the Newcastle-based group from hold to sell.

On Thursday Greggs said it had shown an ability to “mitigate cost inflation in recent years,” adding wage increases should “provide support to customers”.

The baked goods retailer said annual sales topped £2bn for the first time in 2024, rising by 11.3 per cent year on year. However, Deutsche Bank noted that the update marked the ninth consecutive quarter of decelerating like-for-like sales.

Shares dropped by as much as 10 per cent in morning trading in London on Thursday, to £2.35. Shares in retailers Tesco and Marks and Spencer were also hit with uncertainty over inflation and rising costs, despite Tesco reporting its “biggest ever Christmas”.

Analysts at Investec said Greggs’ like-for-like slowdown in the last quarter of 2024 was more pronounced than expected, and “likely to continue” in the first half of 2025.

“In hindsight, it appears [Greggs’] softer July and August may have been more of a trend than a blip,” said analysts at Jefferies.

In a statement Greggs’ chief executive Roisin Currie said: “Lower consumer confidence continues to impact high street footfall and expenditure,” adding that the group was nevertheless well positioned “to meet the headwinds we expect to see in the year ahead”.

She added that Greggs, which opened 145 new stores over the year, when closures were accounted for, leaving it with 2,618 in total, had entered 2025 with a “strong pipeline of new shop opportunities”.

The group’s update comes after data earlier this week showed “minimal” growth in UK retail sales spending in the final quarter of 2024, which also came in behind the rate of inflation, suggesting that consumers cut the volume of goods they purchased.