Greggs: Navigating Heat, Inflation, and Expansion with Resilience
H1 2026 shows profit up 19.7% despite tough market, but second-half headwinds loom; new formats and grocery drive growth.
GRG.L · Earnings Call · 2026-07-28
A resilient first half
Greggs delivered a robust H1 2026 performance, with total sales up 7.2% and profit before tax rising 19.7% to £76 million. The company-managed like-for-like growth of 2.1% came despite a market where volumes declined by just under 2%. CEO Roisin Currie highlighted the strength: “We've delivered a strong financial performance in a market that remains tough.” The improved profitability was partly aided by a soft comparative period last year, when a June heat wave and an unexpected hit to margins. This year, the team have learned to manage heat far better, with better ranging and staffing. As CFO Richard Hutton noted, “I think one of the things the team have done this year is to… they've got much better at managing heat, both in terms of ranging, staff availability, those sort of things.” That operational resilience translated into a leveling of operating margin back to the H1 2024 level.Weather and cost management
The heat wave impact was a recurring theme. Roisin Currie explained that while sales dip in very hot weather, “we've also developed more resilience in terms of our range… having a bigger salad range, having iced drinks, developing Matcha and bringing new flavors to the market is really important because it creates a reason even in hot weather for someone to come to Greggs.” July has already shown a bounce-back, as she stated: “July has seen a much better performance over the last few weeks, higher than the number that we just reported.” On the cost side, food and packaging inflation has been softer than feared. Richard Hutton attributed this to better procurement and lower commodity prices: “So lower costs in terms of food inputs… I don't think we'll need any incremental pricing in the autumn, which was something that we held the option open on.” That is a positive for the consumer-facing value proposition, allowing Greggs to protect its price points.Expansion across formats and channels
Greggs continues to push its multichannel strategy. The grocery opportunity is expanding, with the Bake-at-Home range now in Tesco alongside Iceland, and new products like vegan sausage rolls and pizzas being introduced. Roisin Currie said, “we've just recently launched the Vegan Sausage Roll into the largest Greggs Tesco shops… and we have just gone into their smaller format shops.” The company also today announced a new franchise partner, Lagardère, with a shop at Tenerife South Airport, which is already “hitting all the hurdles we've set.” On the core estate, the focus is on quality over quantity. The company now expects 100–110 net new shops this year plus 10 trials of the new trial formats like Greggs Express and bitesize. These smaller formats allow entry into locations previously unviable. As Roisin noted, “the bitesize opportunity allows us to go to those areas where space is much more compromised.” The company is also leveraging AI to drive efficiency. With Agentic AI, software engineers have transformed their workflows: “80% of what the software engineers are doing now is actually done by the Agentic AI first before then they intervene.” This is part of a broader push to improve pace and productivity across the business.Outlook and shareholder returns
The full-year guidance remains unchanged, but the second half will absorb significant new costs from the Derby and Kettering distribution centers. Richard Hutton quantified: “the Derby operating costs will increase by about £10 million in the second half.” This, along with the annualization of cost phasing, means profit progress will be broadly flat for the year. Still, the company is past the peak of its investment cycle, and free cash flow is set to increase materially. Hutton reiterated the capital allocation policy:That suggests potential for special dividends or buybacks in the coming years. Additionally, the CFO transition — Richard Hutton steps down after 20 years, with Ben Waldron joining as CFO designate — is a notable change in leadership, though the company emphasizes a smooth handover. In a market still facing consumer pressure, Greggs is demonstrating that focused execution and innovation can deliver resilient growth. The mix of better heat management, lower input costs, and disciplined expansion gives some confidence for the medium term, even as the second half will be a test. With a brand that continues to gain value share, the story is one of careful evolution rather than dramatic shift.We aim to have cash on the balance sheet at the end of the year of about 3% of turnover… when we get the cash back to that level, then we would consider anything over that to be surplus cash.