Release Date: March 04, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Greggs PLC (GGGSF) achieved record sales of over 2 billion pounds in 2024, marking an 11% total sales growth. The company reported a strong profit delivery with underlying pre-tax profits of 189.8 million pounds, a growth of 13.2%. Greggs PLC (GGGSF) opened 226 new shops in 2024, resulting in a net growth of 145 shops, with a healthy pipeline for future openings. The evening sales strategy is progressing well, now representing 9% of company-managed shop sales, and delivery sales have grown to 6.7% of sales. The Greggs app has seen significant growth, with 1 in 5 transactions now scanned through the app, enhancing customer engagement and data collection.

Negative Points

The trading environment in 2024 was challenging, with low consumer confidence and a static physical market in volume terms. Greggs PLC (GGGSF) faces significant inflationary pressures, particularly in wage costs, with an expected 8% wage inflation in the coming year. The company anticipates a 6% overall cost inflation for 2025, driven by wage and energy costs. Greggs PLC (GGGSF) is entering a peak investment phase, with capital expenditure expected to reach 300 million pounds, impacting cash flow. The company is experiencing higher administrative expenses due to increased investment in technology and ERP systems.

Q & A Highlights

Q: Can you provide more details on the strategic growth drivers and how they are impacting Greggs' performance? A: Roisin Currie, CEO, highlighted that Greggs' strategic growth drivers include menu innovation, expanding shop locations, and enhancing digital channels. The introduction of new products like the over-a-drinks range and hot wraps has been successful. The company continues to open new shops, with a focus on underrepresented areas, and is investing in digital capabilities to enhance customer engagement and sales.

Q: How is Greggs managing cost inflation, particularly in terms of wages and food costs? A: Richard Hutton, CFO, explained that Greggs is experiencing cost inflation, especially in wages, with an expected 8% increase. The company is managing this through strategic pricing and cost recovery measures. Food and packaging costs were slightly deflationary last year, and they expect single-digit inflation in the coming year. Greggs aims to maintain its value proposition despite these pressures.

Q: What are the plans for expanding Greggs' shop network, and how are new locations performing? A: Roisin Currie stated that Greggs plans to open 140 to 150 new shops in the coming year, with a focus on areas where they are underrepresented. New shops are delivering strong returns, typically achieving a 25% return on investment within two years. The company is also relocating and refurbishing existing shops to better serve customers and enhance sales.

Story Continues

Q: Can you elaborate on the investment in supply chain and technology, and how it supports Greggs' growth? A: Richard Hutton mentioned that Greggs is in a peak investment phase, focusing on expanding supply chain capacity with new sites in Derby and Kettering. These investments will support the company's growth plans by increasing production and distribution capabilities. Additionally, Greggs is investing in technology, including upgrading its ERP system, to improve operational efficiency and customer experience.

Q: How is Greggs addressing the evening trade and delivery channels to boost sales? A: Roisin Currie highlighted that evening trade is the fastest-growing segment, now representing 9% of company-managed shop sales. Greggs is expanding its menu options for the evening consumer and enhancing delivery services through partnerships with Uber Eats and Just Eat. The company is also leveraging its app to drive customer engagement and sales, with 1 in 5 transactions now scanned through the app.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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