Dear reader.
For the best part of two years the market had quietly decided Greggs (LON:GRG) was finished. Not broken, just done growing. The shares had halved from their August 2024 high, the short sellers had moved in, and “peak Greggs” had hardened into received wisdom: the theory that a country can only get through so many sausage rolls, and that Greggs had finally found the number. Wednesday’s interim results were an awkward afternoon for that theory. The shares closed up 18.5% at £20.02, the biggest one-day move in about five years, and a good few bears were left explaining themselves.
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The numbers
Start with the top line, because it stubbornly refuses to play along with the gloom. Total sales ran £960.6m in H1 2024, £1,027.7m in H1 2025 and £1,101.5m this time, which is roughly 7% growth in each of the last two years and not much sign of a nation that has fallen out of love with a warm pasty. Profit is where it gets bumpy. Operating profit went £75.8m, then £70.4m, then £86.5m; pre-tax profit £74.1m, £63.5m, £76.0m; diluted earnings per share 53.8p, 45.3p, 54.9p. That shape is a V, and the dip in the middle is 2025, the half in which the June heatwave did its worst. This year’s eye-catching growth rates, with operating profit up 22.9%, pre-tax up 19.7% and EPS up 21.2%, look as good as they do largely because they are measured off the bottom of that dip.
The fairer comparison is 2024, the last first half before the weather intervened. And the weather matters more to Greggs than to almost any business its size, for the least sophisticated reason imaginable: nobody wants a hot sausage roll when it is 30°C outside. A proper hot spell feeds straight through to the till, which is exactly what happened in 2025. The encouraging bit this time is that the chain traded through a warm May and June far better than it managed a year ago. Set against that cooler 2024 base, though, the picture is more sober. Operating profit is up around 14%, a real step forward, but pre-tax profit is only about 2.6% higher and EPS just 2% higher. Two years of 7%-a-year sales growth has delivered almost no growth in per-share earnings once the rebound is taken out. The margins say the same thing without the drama: the pre-tax margin recovered 70 basis points to 6.9%, which flatters against 2025 but still sits around 80 basis points below the 7.7% Greggs earned in H1 2024, while operating margin is basically back where it was in 2024 at just under 7.9%. The shops are about as profitable as they ever were. Something between the operating line and the pre-tax line is simply taking a bigger cut than it used to.
That something is the finance charge, and it is the number nobody put in a headline. The gap between operating and pre-tax profit has stretched from roughly £1.7m in H1 2024 to about £10.5m now. The finance expense line on its own climbed to £11.3m from £8.2m a year earlier, almost all of it IFRS 16 interest on lease liabilities, which ticks up every time Greggs opens a shop or renews a lease at today’s rates rather than the ones it signed a decade ago. Pulling the other way, the tidy interest income the company used to earn on its cash pile has mostly gone, spent on the very expansion driving those lease costs up. Growth, in short, is no longer free. It now lands as a real bill below the operating line, and the bill gets bigger with every shop. The dividend rather gives the game away. The interim payout has been frozen at 19.0p for three years running, held there again despite EPS climbing back above 2024, which is management’s polite way of saying the balance sheet comes first and shareholders can wait for the rise.
Volume versus price
The like-for-like line rewards a closer read. Company-managed shops grew LFL sales 2.1%, down from 2.6% a year ago, with franchised shops up 1.3%. RBC’s Ross Broadfoot made the point that most of that came from price and mix, with underlying volumes down by an estimated 2%. Greggs, for its part, pointed to higher total volumes and a growing share of food-to-go visits, at 8.7% of the market even as visits across that market fell 1.9%. Both are true at once, which is the awkward part. The group is selling more in aggregate because it has more shops and a bigger grocery arm, while each existing shop is being carried by price rather than by more customers coming through the door. Anyone weighing up the quality of this growth has to be straight about which of those is doing the work, because a same-store line propped up by price rises during a squeeze on household budgets has a natural ceiling.
The squeeze
Some of Wednesday’s fireworks were mechanical rather than fundamental. Greggs went into results as one of the most shorted names on the London market, with disclosed short positions of around 13.9% of the shares as of the day before the release. That was already down from the peak in January, when roughly a quarter of the register was out on loan. A decent set of numbers landing on a crowded short book is a bit like dropping a full tray in a quiet shop: everyone spins round at once. The scramble to buy back borrowed stock almost certainly turned a good day into an 18.5% one. Hold onto that before admiring the size of the move, because management did not raise a single figure of full-year guidance on the day the shares jumped.
The strategy…
Underneath the share-price theatre, the plan is much as it was. Greggs still reckons the UK can take at least 3,500 outlets against 2,773 today, and it added 34 net new shops in the half. It is guiding to 100 to 110 net openings across 2026, ten of them trial sites for “Greggs Express”, a self-service counter for petrol forecourts and convenience stores, on the sound logic that you may as well grab a sausage roll while you are paying for the fuel. The smaller “bitesize” shops reach high streets that could never support a full store, and the company has now opened, in a phrase few expected to write, its first airport shop abroad, at Tenerife South.
The grocery arm is the more interesting leg. The frozen “Bake at Home” range, which started life in Iceland back in 2011, went into Tesco (LON:TSCO) last September, and management hinted at more retail tie-ups to come. This is the good kind of growth, because it puts the brand in front of households that never walk past a high-street shop, and it does so without the capital and, crucially, the lease costs that are now nibbling at pre-tax profit. On the menu, the drift is towards cold and higher-protein lines, with iced matcha, an expanded salad range and a new chicken roll all cited as drivers. Currie’s framing is that the health push sits happily alongside a “trend to indulgence” that keeps the sausage rolls moving, which is a diplomatic way of admitting the core still pays the bills.
Costs, cash and the supply chain
The operating margin held up because costs were kept on a short leash, with labour and waste both called out. Greggs is chasing £11m of structural cost savings this year and has banked £7m so far. New distribution centres at Derby and Kettering are going up to feed an estate of as many as 3,500 shops, and group capex is guided down from £200m to £180m as that programme comes off the boil.
At group level the balance sheet has flipped back to net cash of £15.9m, from £12.8m of net debt a year ago, with operating cash flow after lease payments up to £111.2m. On the call, management talked about keeping around 3% of turnover in cash and handing the surplus back through special dividends or, increasingly, buybacks as the business turns more cash-generative through 2028. Read against that frozen ordinary dividend, the running order is plain enough: mend the balance sheet first, reward shareholders second.
Management change
One change that got less attention than it warranted: Richard Hutton, the long-serving CFO, retires at the end of 2026 after 28 years with the company and 20 on the board. Ben Waldron joins in October as CFO-designate and overlaps through the handover. Nearly three decades of institutional memory walking out of the finance department is not nothing, especially with the buyback conversation only just getting going, so the transition is worth keeping half an eye on.
Outlook
For all the drama, guidance did not budge. The board still expects full-year underlying pre-tax profit broadly in line with 2025’s figure of around £172m, and warns that the second half will carry higher costs. There is at least decent visibility on the inputs, with forward buying covering most of this year’s food and packaging needs and about half of 2027’s already hedged. An unchanged full-year outlook sitting next to a near-20% share move tells its own story. The first half was a recovery, not a re-rating of the business by the business, and nobody should be doubling the H1 run-rate into the back end of the year.
So what did the results actually prove? They saw off the lazy version of the peak-Greggs story. Sales are still growing at around 7% and the shop count is still climbing, in a food-to-go market that actually shrank over the period. What they did not prove is that the growth is worth quite as much as the top line makes it look. Underlying shop volumes go soft the moment you take price out, the flattering 2025 comparison disappears after June, and every new shop now drags a little more lease interest behind it before a penny reaches earnings. The two numbers to watch into the second half are the underlying volume trend in company-managed shops and the pre-tax margin, because that is where a genuine recovery would show up first, and where the short sellers will be waiting to see their story come back.
Ollz.
Further reading
Greggs H1 2026 interim results statement. The primary source, with the full profit and loss account, cash flow and segmental detail.
Greggs H1 2026 earnings call transcript (Investing.com). Management in its own words on July trading, warm-weather resilience and the buyback question.
This article is provided for information and general interest only. It does not constitute investment advice or a recommendation to buy, hold or sell any security, and nothing here should be relied upon as such. Figures are drawn from publicly available sources believed reliable at the time of writing and are subject to change. Readers should carry out their own research and, where appropriate, seek independent professional advice. The value of investments can fall as well as rise.
Great overview thanks for sharing 😀
I held mine through the surging short interest. Am still holding.
Their accounts are one of the cleanest I've ever read.
I thought people are underestimating its growth potential. There's a lot more room to grow, either through franchise or retail tie-ups.
Looking forward to the next quarter