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Greggs (LSE:GRG) shares are down 8% this morning (4 March) because the FTSE 250 agency launched its outcomes for 2024. And I feel there’s loads for buyers to be involved about.
Lots of the knowledge had already been launched within the replace from 9 January. However that hasn’t stopped the share worth from dropping additional within the wake of the announcement.
What we already knew: slowing development
Traders already knew 2024 had been difficult for Greggs. Gross sales development got here in at 11.3%, with like-for-like gross sales up 5.5%, however this was nicely wanting the 19.6% and 13.7% of 2023.
On prime of this, the corporate elevated its retailer depend by 226 models and it intends to maintain opening shops in 2025. Once more, nonetheless the speed of development is predicted to be slower.
In 2024, Greggs expanded its retailer depend by just below 10%. The forecast for 2025, nonetheless, is for a rise of between 5% and 6%.
Slowing development in 2024 was already identified about earlier than the most recent replace. However the outlook for 2025 when it comes to buying and selling situations additionally seems to be comparatively weak.
What we’ve discovered: extra challenges
Administration reported that like-for-like gross sales have elevated 1.9% in the course of the first 9 weeks of 2025. That’s beneath the speed of inflation and – I feel – the largest concern for the corporate.
Roisin Currie – the agency’s Chief Govt – acknowledged that the present atmosphere is hard. In addition to shoppers coping with cost-of-living pressures, Greggs is going through larger staffing prices.
With a purpose to shield its fame as providing good worth to clients, the enterprise is making an attempt to keep away from rising costs. However that creates stress on margins.
There was, nonetheless, some constructive information for revenue buyers. In step with its earnings development in 2024, the agency elevated its dividend to 69p for the complete yr.
Evaluation
Greggs shares have been falling because the begin of 2025 and it’s not exhausting to see why. Firstly of the yr, the inventory was priced for development that hasn’t actually materialised.
I believe gross sales have been much less proof against inflationary stress than some buyers might need hoped. In actual phrases, they’ve been detrimental because the begin of 2025.
Within the brief time period, the corporate would possibly have the ability to preserve transferring ahead by opening extra shops. Nevertheless it received’t have the ability to do that indefinitely and the enlargement fee is slowing.
In some unspecified time in the future, the inventory might get to a stage the place it’s good worth regardless of the restricted development. Traders must determine for themselves the place that’s – I don’t suppose it’s right here.
Silly takeaways
Buying and selling situations are robust for Greggs, however I feel there’s motive for optimism. It’s a tricky atmosphere for the business as an entire and the corporate is one of the best at what it does.
I count on issues to choose up for the enterprise when the financial atmosphere begins to enhance. However that doesn’t look imminent, so I’m not in a rush to purchase the inventory proper now. I don’t suppose buyers ought to rush to contemplate it in the present day both.
