Greggs (LON:GRG) reported higher first-half sales and profit for 2026, supported by estate expansion, grocery distribution and improved management of costs during periods of hot weather, while maintaining its full-year expectations.
Total sales increased 7.2% in the first half, including 2.1% like-for-like growth at company-managed shops. Profit before tax rose 19.7% year over year to £76 million, while operating cash flow increased 18.3%. The company maintained its interim dividend at 19 pence per share.
Weather resilience and sales channels
Management said the business had improved its response to hot weather following the heatwave that affected first-half 2025 results. Richard Hutton, chief financial officer, said consumers generally eat less when temperatures rise, but the company had improved its ranging, staffing and waste management. Iced drinks and a broader chilled-food offering also provided some mitigation.
Roisin said July trading had improved in recent weeks, running above the 2.1% company-managed like-for-like sales figure reported for the first half and slightly ahead of internal expectations, as temperatures became milder. She cautioned that particularly hot days continued to affect demand.
Growth during the first half was not solely driven by existing shops. Hutton said estate expansion contributed roughly twice as much sales growth as company-managed like-for-like sales. Business-to-business revenue also increased, reflecting franchise development and the expansion of the Bake at Home grocery range in Iceland and Tesco.
The company said its grocery business is benefiting from further distribution and product launches. Greggs recently added Margherita and Pepperoni pizzas to Iceland and introduced its Vegan Sausage Roll to larger Tesco stores, while two popular products have been added to Tesco’s smaller-format locations.
- Company-managed like-for-like sales growth was 2.1%.
- Total sales growth was 7.2%.
- Profit before tax reached £76 million.
- Diluted earnings per share rose to 55 pence from 45 pence a year earlier.
- Operating cash flow increased to £111 million from £94 million.
Costs, inflation and second-half outlook
Hutton said lower food and packaging inflation supported first-half margins, with some input categories moving into deflation. Coffee, cocoa and pork markets were among the areas that had improved relative to earlier expectations. Greggs now expects overall cost inflation of about 2% for 2026, compared with an earlier expectation of 3%.
The company has approximately 70% of its food and packaging needs for the second half fixed, while 90% of its annual energy and fuel requirements are covered. People costs are expected to rise by about 4% for the full year. Greggs also expects to receive an annualized benefit of approximately £3.5 million from lower business rates beginning in April.
Hutton said the company had delivered around £7 million of structural savings in the first half, against a full-year target of £11 million. Greggs does not expect to require an additional price increase in the autumn, saying existing pricing should be sufficient for the year.
However, management reiterated that full-year profit is expected to be broadly flat year over year. The outlook reflects approximately £10 million of additional operating costs in the second half related to the Derby national distribution center, as well as the timing of inflation. Hutton said the annualization of Derby costs and the start-up of the Kettering distribution center would make 2027 a “pinch point,” with limited expected profit progress while the company absorbs those costs.
Derby is expected to become operational in the coming months, while Kettering is due to open in the first half of 2027. Management expects the facilities to create logistics capacity for 3,500 U.K. shops and said the company should begin to gain operating leverage from the investments from 2028.
Estate growth and new formats
Greggs reduced its capital expenditure guidance for 2026 to £180 million from £200 million, following lower expected net shop additions and reduced contingency requirements on supply-chain projects. The company now expects net shop growth of 100 to 110 locations this year, compared with prior guidance of 120.
Hutton said the slower opening pace reflects a focus on return quality rather than shop numbers. New locations are meeting or exceeding the company’s mature cash return-on-investment target of 25% after two to three years. About 62% of new shop catchments do not have an existing Greggs within one mile, while sales transfer from existing shops has been slightly below the anticipated 5% level.
Management said it expects to open at least 100 net new shops annually over the medium term and sees an opportunity for at least 3,500 U.K. locations over the longer term. Franchise-operated sites currently account for 22% of the estate, and Greggs said it would be comfortable increasing that proportion toward one-quarter.
The company is also testing smaller formats. Its Greggs Bite Size format can operate in roughly 800 square feet, compared with about 1,200 to 1,400 square feet for an average full-sized shop. The four existing Bite Size locations have produced encouraging results, according to Roisin, though she said the trial remains at an early stage.
Greggs also has three self-service Greggs Express trials operating in petrol forecourts, offering coffee, hot food and sweet treats within partner retail spaces. It expects to have around 10 trial locations by year-end. Separately, its first international travel-hub franchise shop, opened with Lagardère at Tenerife South Airport in May, is meeting its sales hurdles during what management described as the destination’s low season.
Cash generation and leadership transition
With capital intensity declining after a period of supply-chain investment, Hutton said Greggs is returning to stronger free cash generation. The company ended the first half with £16 million of net cash and has extended its £100 million revolving credit facility to June 2029.
Under its capital allocation policy, Greggs aims to hold year-end cash equal to around 3% of turnover, which Hutton said would equate to roughly £70 million at the end of 2026. Cash above that level could be considered surplus. He said the company has historically used special dividends to return excess cash, but the board would also consider share buybacks.
Hutton will remain CFO through the end of 2026 after 20 years in the role and 28 years with Greggs. Ben Waldron will join as CFO designate at the end of October and assume the CFO position on Jan. 1, 2027.
About Greggs (LON:GRG)
Greggs is a leading UK food-on-the-go retailer with more than 2,700 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.
