Greggs (LON:GRG) said it continued to make progress in what management described as a challenging market, reporting full-year total sales growth of just under 7% for 2025, including 2.4% like-for-like growth in company-managed shops and 4.3% like-for-like growth in franchise shops. The company said underlying operating profit and underlying profit before tax were in line with expectations and proposed an ordinary dividend of 69 pence, unchanged from the prior year.
Sales growth, market share gains and trading backdrop
Management pointed to market outperformance despite weaker consumer conditions. Citing Circana data through the end of December 2025, the company said its market share of visits increased by 0.5 percentage points to 8.6% while overall market visits declined by just over 3%.
On early 2026 trading, Greggs reported like-for-like sales growth of 1.6% for the first nine weeks, with total sales up 6.3%. Management said performance had been affected by poor weather conditions, particularly an “incredibly wet January” in parts of the UK, and also highlighted that current like-for-like figures reflected less price inflation than in the prior year.
Profit performance, VAT item and margin drivers
Finance Director Richard Hutton said sales rose nearly 7% but reported operating profit declined 4% and profit before tax fell 9.4%. Greggs also highlighted a small exceptional item related to an understatement of VAT that the company self-identified and which dated back a number of years. Management said it removed the element relating to prior years to avoid distorting the 2025 result and reported profit before tax for the year of £167 million.
Diluted earnings per share were down 10.7%, which the company attributed in part to a slightly higher effective tax rate. Hutton said the corporation tax rate was about 1% higher than normal due to lower deductibility related to share options, reflecting a lower share price during the period. He said this was temporary and that modeling the tax rate at around 1% above the headline rate remained appropriate going forward.
On cost dynamics, the company described gross margin as relatively stable, supported by a more balanced relationship between cost and price inflation. It noted some dilution from increased usage of the Greggs app, as more customers used discounts. Distribution and selling costs were pressured by volume impacts on fixed costs and what management described as a slight under-recovery of wage inflation. Administrative expenses were described as well controlled and leveraged as the estate expanded.
Net finance expense increased, which Greggs attributed primarily to lower interest income after deploying cash into its investment program rather than holding larger cash deposits.
Inflation outlook, cost initiatives and business rates
Greggs said it experienced 5.6% cost inflation in 2025 and expected inflation to moderate to around 3% in 2026. It anticipated food and packaging inflation would be low single digit and said it had around four months of food and packaging needs covered.
Energy remained volatile, management said, but the company had all electricity covered for 2026 and more than half secured for 2027, with diesel representing about one-eighth of its energy mix. Wage inflation was “very inflationary” in 2025, with wage cost inflation of just over 8%, but the company expected that figure to be closer to 4% in 2026. Hutton also said Greggs had moved the timing of its annual pay award to April, which he said would result in relatively low wage inflation in the first quarter and support the first-half profit result.
The company also pointed to business rates changes, saying it expected an annual benefit of about £4 million from April, equating to around £3 million in the current financial year.
Greggs said it delivered what it called its “best year ever” for cost reduction initiatives in 2025, taking about £30 million out of the business. Management cited efforts including workforce planning tools, new till software and payment terminals to speed service, experiments with automated temperature monitoring for food safety, supply chain optimization enabled by vertical integration, in-housing manufacturing where capacity allowed, and increased use of technology in support teams. The company also said it expected AI tools to support productivity improvements further over time.
Capital investment, free cash capacity and returns
Greggs reported capital expenditure of £287 million in 2025, calling it the peak year for investment. Retail-related capital spending was described as broadly stable, while supply chain investment rose to £147 million, including new sites designed to support future capacity. IT spending also increased as the company began upgrading to SAP S/4HANA, with initial elements installed in the summer and finance and procurement processes migrated from August.
Looking ahead, Greggs guided to capex of around £200 million in 2026 and a range of £150 million to £170 million from 2027 onward, saying it had taken £20 million to £25 million out of the forward capital intensity. Management said this creates increasing headroom as operating cash generation exceeds capex, providing capacity for additional shareholder returns beyond the ordinary dividend over time.
Hutton said operating cash inflow was £273 million and net cash at year-end was £46 million, supported by £25 million drawn from the revolving credit facility (RCF). He said this implied about £70 million in cash, with liquidity of £146 million including the undrawn portion of the RCF. Management reiterated its capital allocation priorities: maintain the business, retain a strong balance sheet with a cash buffer of around 3% of revenue for seasonality, maintain an ordinary dividend around two times covered by earnings, invest selectively for growth, and return surplus cash through potential special dividends or buybacks when appropriate.
Expansion strategy, channels and product innovation
The company reiterated its estate expansion approach, highlighting a target cash return of 25% on shop and supporting supply chain investment, typically achieved within two to three years, with mature shop returns exceeding 30% on an ROI basis. Greggs said 53% of shops opened in 2025 were in areas with no existing Greggs within a mile and reported recorded sales transfer from an existing site of less than 5% where there was another location nearby.
For 2026, management said it was targeting around 120 net new shops, consistent with the prior year. It also said it planned to hold refits tighter, at around 50 to 60, or about half the number in 2025, citing both capital intensity and the longevity of the current refit format.
Greggs emphasized channel development, including grocery and delivery. Management said it launched a small range in Tesco in September and expanded distribution from 800 larger Tesco stores to a further 1,900 Tesco Express stores. Delivery grew to 6.8% of sales mix, which Greggs said is incremental and delivers a higher basket size, and the company said it is investing in improved technology to support further growth. Loyalty continued to expand, with more than 26% of transactions now scanned through the app, and the company described “Greggs Quests” rolled out in November to encourage repeat visits.
Evening trading remained the fastest-growing daypart, reaching 9.4% of sales, with management citing evening delivery as a significant growth opportunity.
On the menu, Greggs said it was evolving its range to reflect consumer trends including demand for fiber, higher protein and smaller portions, citing products introduced last year such as turmeric and ginger shots, protein shakes and an egg pot. It also cited newer items including a Tandoori Chicken Pizza and a Red Pepper, Feta & Spinach Bake, and said it recently introduced an Iced Matcha Latte priced at £3.
In supply chain, the company said it is investing in two new national distribution centers to create logistics capacity for up to 3,500 shops. It said both sites were on schedule and on budget, with Derby expected to open later in 2026 and Kettering in 2027. Management said Derby would be a headwind of about 40 basis points to the current year, while Kettering costs would begin to come through from around mid-2027, with the cost impact annualizing into 2028.
Greggs said expectations for 2026 were unchanged. Management added that it expected a stronger first half supported by cost phasing but anticipated a broadly flat full-year profit outlook due to the second-half costs associated with the new Derby site.
About Greggs (LON:GRG)
Greggs is a leading UK food-on-the-go retailer with more than 2,600 shops nationwide and approximately 33,000 employees across the business.
As a food-on-the-go retailer, Greggs specialises in daily fresh shop-made sandwiches, and savouries baked fresh in the shop ovens throughout the day. These are further complemented by popular products and ranges including freshly ground coffee, breakfast, confectionery and evening menu items. Greggs also offers a healthier options range which includes a selection of gluten-free, vegan-friendly and lower calorie products.
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