Key facts
- Greggs reported a 20% increase in pre-tax profit to £76m for the first half of the year.
- The company plans to expand its UK store estate to at least 3,500 locations.
- Greggs shares rose nearly 15% to 1,934p.
- Sales increased 7.2% to £1.1bn in the first half.
- Greggs opened its first overseas location in Tenerife South Airport.
Greggs shares surged nearly 15% after the bakery chain announced plans to expand to at least 3,500 UK sites, building on a 20% rise in pre-tax profit to £76m in the first half of the year. The company is targeting underrepresented areas and has opened its first overseas location.
The company reported a 7.2% increase in sales to £1.1bn for the six months to June, surpassing analysts' forecasts. This profit growth was partly attributed to the launch of new menu items, including a chicken sausage roll and lighter options like salads and matcha lattes that performed well during the summer heatwave. Chief executive Roisin Currie indicated that expansion will focus on areas where the chain is currently underrepresented, such as retail parks, train stations, airports, and roadsides, while also optimizing store distribution in towns and cities to avoid cannibalizing sales from existing locations.
Greggs currently operates 2,773 locations in the UK and one overseas branch in Tenerife South Airport. While investors had previously expressed concerns about Roisin Currie's plans to reach 3,000 sites, the increased target of 3,500 was met enthusiastically by the market. Currie suggested there could be even more room for expansion beyond 3,500 sites, citing the capacity of the supply chain being built.
However, some analysts expressed caution. Chris Beauchamp, IG's chief market analyst, noted that sales volumes are not materially rising and suggested the share price jump might be due to short-covering rather than a vote of confidence. Susannah Streeter, chief investment strategist at Wealth Club, reminded that shoppers are still feeling the pinch. Greggs admitted that its expansion could impact short-term profitability due to investment in new locations, but expects overall profit for the year to meet forecasts. Lale Akoner, an eToro market strategist, believes the plans are not overambitious and that management is prioritizing returns. New bakeries are reportedly pilfering less than 5% of sales from their nearest neighbors, with 62% of new locations last year being in areas with no other Greggs within a mile.