Greggs reports resilient 2025 with record sales but lower profits, maintains dividend

• Delivery sales up 8.1%, representing 6.8% of company-managed shop sales (2024: 6.7%).
• Evening remains the fastest-growing daypart – now 9.4% of company-managed sales (2024: 9.0%).
• Greggs App scanned in 26.7% of transactions (2024: 20.1%) – engaged customers shop more frequently.
• Grocery channel broadened – Bake-at-Home launched with Tesco and range expanded with Iceland.

Estate growth and new formats

Greggs opened 121 net new shops in 2025, taking the estate to 2,739. More than half of openings were away from the high street – think forecourts, retail parks, supermarkets, hospitals and universities – which spreads risk and taps underpenetrated locations.

The business is trialling a compact ‘bitesize Greggs’ format for high-footfall, tight-space sites and is also exploring unattended retail solutions. Importantly, cannibalisation looks well controlled: in areas with an existing shop within a mile, average sales transfer from 2024-2025 openings was less than 5%.

Guidance for 2026 is around 120 net openings, with a strong pipeline aiming at retail parks, railway stations, airports, roadsides and supermarkets.

Costs, capex and cash: near-term drag, medium-term springboard

Greggs delivered £13.0 million of structural cost savings in 2025, beating its stretch target. Like-for-like cost inflation was about 5.5% in the year, expected to moderate to roughly 3% in 2026, with employment costs still the main driver. Commodity exposure is well covered, including 100% of electricity fixed for the year.

Capital expenditure peaked at £287.5 million in 2025 as two new National Distribution Centres in Derby and Kettering progressed on time and on budget. These sites lift logistics capacity to support around 3,500 shops and introduce more automation. Capex is guided to fall to about £200 million in 2026, then £150-170 million from 2027 onwards – a key inflection for free cash flow and potential shareholder returns.

Underlying return on capital employed was 16.0% (2024: 20.3%). Management’s priority is to restore ROCE to around 20% over the medium term, with 2026 flagged as another dip as Derby is commissioned, stabilisation in 2027, and recovery from 2028 as capacity is leveraged.

Net cash ended at £45.8 million, with total liquidity of £145.8 million including an undrawn £75.0 million revolving credit facility committed to June 2028.

Current trading and 2026 outlook

The first nine weeks of 2026 show like-for-like sales up 1.6% and total sales up 6.3%, with strong cost control supporting profit conversion. Full-year guidance is unchanged – profits expected at a similar underlying level to 2025, with any improvement contingent on a better consumer backdrop.

Management expects profit progress in the first half given the phasing of cost inflation, while higher fixed costs from commissioning Derby will mainly impact the second half.

My take: resilient core, credible plan, patience required

This is a classic investment phase update. The headline is simple: strong sales and share gains, a temporarily lower margin. Greggs is spending heavily to widen the moat – more shops in under-served channels, deeper digital engagement, and a supply chain scaled for 3,500 shops. That depresses ROCE now, but should enable faster, more efficient growth later.

Positives:

• Record sales and market share gains in a shrinking market – that is genuine outperformance.
• Cash generation remains robust – diluted operating cash inflow per share up 4.6% to 267.1p.
• Capex rolling down from 2026, creating capacity for additional cash returns.
• Digital and evening/delivery traction extends dayparts and raises frequency.

Watch-outs:

• Margins and ROCE are under pressure – underlying ROCE 16.0% and set to dip in 2026.
• Flat profit guidance for 2026 points to a slower earnings year while Derby ramps.
• Net cash is lower as investment peaks – not a concern given liquidity, but worth tracking.
• VAT correction of £4.5 million is small in context, but investors will want assurance on controls.

Overall, the long-term equity story looks intact: value leadership, vertical integration, brand strength and a clear route back to 20% ROCE once new capacity is sweated. Near term, this is more of a hold-and-watch for earnings momentum than a upgrades moment.

Key KPIs to monitor in 2026

• Like-for-like sales growth – particularly as inflation eases and volumes matter more.
• App engagement – scans already at 26.7% of transactions; further gains should support frequency and mix.
• Evening and delivery mix – 9.4% and 6.8% respectively in 2025; continued growth can lift average ticket sizes.
• Capex delivery – Derby onstream mid-2026 and Kettering for 2027, on time and on budget.
• ROCE trajectory – expected dip in 2026, stabilise 2027, recover from 2028.
• Net cash and liquidity – year-end cash of £45.8 million and total liquidity £145.8 million provide headroom.

Bottom line

Greggs has navigated a difficult consumer year with record sales, held its dividend, and kept investing for the next leg of growth. Profits are softer, but the levers for recovery – more shops in better locations, automation, digital loyalty, and structural cost savings – are in place. If management executes on Derby and Kettering while maintaining value leadership, the earnings and returns picture should brighten as capex normalises.