Shore Capital slashes forecasts for Greggs, sees stock 'treading water'

The share price of Greggs tanked on Wednesday after the fast food bakery chain warned of lower profits this year, with Shore Capital saying it expects the stock to "tread water" for the foreseeable future.

The broker kept a 'hold' rating on the stock, which was down 15% at 1,683p by 1400 BST, taking its year-to-date loss to 40%.

In an unscheduled trading update, Greggs revealed that FY25 EBIT may be "modestly below" the £195.3m achieved in FY24 despite sales growth in the first half.

The company said it had made "good progress" in May but noted this was followed by "slower growth" in June as high temperatures affected the UK, increasing demand for cold drinks but reducing overall footfall.

Shore Capital said the update "makes for unpleasant reading" with like-for-like growth of 4% in May curtailed by recent hot weather.

"We believe June’s LFL sales have been barely positive, so a mid-single digit volume decline, a perfect storm for an integrated manufacturer/retailer," the broker said.

Shore Capital has now lowered its FY25 EBIT forecast to 5% below the FY24 result, equating to a 9% downgrade to £186m.

"We reiterate our view that Greggs is a very high-quality business, with a strong management team and relative value/quality position on the high street that is amongst the leading pack in Food to Go," the broker said.

"However, after a sustained hot streak we forecast a more subdued financial outcome over the medium term and see the stock treading water for some time."