Greggs shares sink after demand slows in second half of 2024

greggs stock plummeted on Thursday even though the sausage roll maker reported its sales surpassed £2bn last year.

Britain’s largest bakery chain attributed the impact on footfall and spending at its high street stores during the second half of 2024 to weak consumer confidence and a “more challenging market backdrop”.

As a result, comparable sales at company-operated stores rose just 2.5 percent in the fourth quarter, half the increase from the previous three months.

Following this announcement, Greggs shares fell 14.9 per cent to £22.36 in late afternoon trading, making it the biggest faller on the FTSE 250 index by some margin.

However, the Newcastle-based company’s strong performance in the first half helped its annual turnover surpass £2bn for the first time.

Revenue was around £200m higher than the previous year and more than 70 per cent above its pre-pandemic levels.

Greggs noted that pizza boxes and pizza pack deals saw increased sales, while its festive cakes and new festive flatbreads were popular over Christmas.

There was also healthy demand for its range of iced drinks, now available in 1,100 stores, well ahead of Greggs’ target of being available in 700 stores by the end of 2024.

The company opened a record of 226 new establishments in 2024, raising its total park to 2,618 establishments as of December 28.

It plans to launch another 140 to 150 net new stores this year, including 50 targeted relocations.

Roisin Currie, chief executive of Greggs, said: “We continue to expand our menu and enhance our digital capabilities, whilst building our supply chain capacity to deliver on our growth strategy.

“While lower consumer confidence continues to impact on-street traffic and spending, our value-for-money offering and the quality of our freshly prepared food and drink positions us well to weather the headwinds we expect to see in next year.”

Greggs warned that higher labor costs would result in additional cost inflation in 2025, although he said Britons should benefit from higher incomes.

Employer National Insurance contributions will rise to 15 per cent on staff salaries over £5,000 from April, compared to the current rate of 13.8 per cent on salaries over £9,100. sterling.

In addition, the national living wage will increase by 6.7 per cent to £12.21 per hour, and the national living wage for 18-20 year olds will increase by 16.3 per cent to £10 per hour.

Roisin Currie said around two-thirds of Greggs staff enjoyed a 6 per cent pay rise at the start of 2025.

However, Greggs subsequently had to increase prices on some products by between 5p and 10p, such as its flagship sausage rolls, which now cost customers £1.30.

Russ Mould, investment director at AJ Bell, commented: ‘Some people will put up with the higher price, but others will buy less frequently or not at all, meaning Greggs needs to come up with a new game plan.

‘At the end of the day, new stores continue to open and costs increase. Greggs is good at product innovation and it will be interesting to see if it launches a ‘cheap’ item where it can count on high sales volumes to keep the tills open non-stop.’