Greggs expansion under fire as profits warn and shares slump
Critics say the bakery chain expanded too quickly and its increasingly diversified formats are testing consumer tolerance amid a fragile economy.
Greggs plc is under renewed investor scrutiny after warning on profits and seeing its share price halve over the past year. The bakery chain has pursued an aggressive expansion plan aimed at 3,000 outlets, with as many as 150 new stores expected to open by year-end as part of a broader push to broaden its footprint. Traders will scrutinize this week’s trading update for signs of whether the strategy is sustainable in a consumer environment that remains fragile.
Currie blamed the unusually hot weather for stifling demand for steak bakes and sausage rolls—both vegan and meat varieties—and signaled continued expansion into longer hours and more evening meals, including pizzas, chicken goujons and hot baguettes. The company has also pushed ahead with opening-hour extensions and more dine-in opportunities as it eyes a broader daily audience.
Yesterday, Greggs opened its first pub inside the Fenwick department store in Newcastle upon Tyne, serving local beers alongside 15 Greggs-inspired dishes. The move underscores management’s plan to diversify beyond a bakery-and-snacks format as it pursues a cross-restaurant presence to attract customers across the day.
Investors and analysts expressed caution about the pace and scope of the expansion. 'Questions as to whether Greggs has expanded too far, too fast and made its menu too complicated have added to wider worries over the state of the UK economy,' said Russ Mould, investment director at AJ Bell. The broader consumer spending environment remains fragile, said Aarin Chiekrie, equity analyst at the investment platform Hargreaves Lansdown. 'While Greggs has relied on price increases to support like-for-like sales growth, the company must be careful not to stretch customer tolerance too far.'
Greggs has long benefited from the cost-of-living surge, even overtaking McDonald's as Britain’s most popular breakfast venue. Still, rising costs—particularly from the employer National Insurance increase in last year’s Budget—have weighed on retailers and added to the uncertainty surrounding discretionary spending on the high street. Analysts caution that the balance between price, value and expansion risk will be pivotal as management readies its trading update and confirms whether the current trajectory can be sustained.
With the trading update due this week, Greggs emphasizes its long-term plan to reach 3,000 outlets. The outcome may hinge on consumer demand, input costs and the company’s ability to manage a broader menu and more formats without eroding value for core customers.
