Well Run, Fully Priced

Interim results for the 26 weeks ended 27 June 2026, published 29 July 2026. All figures in pounds sterling.

Greggs is the UK’s largest food-to-go retailer, selling bakery items, savouries, sandwiches and hot drinks through a mostly company-owned shop estate. It is vertically integrated — it manufactures and distributes its own product from its own bakeries and distribution centres, which is where the strong gross margin comes from.

Revenue arrives through three routes, and the distinction matters for everything that follows: company-managed shops (the bulk of sales); the business-to-business channel, covering franchised shops (in travel hubs and forecourts, run by partners like Primark and forecourt operators) plus the newer grocery retail partnerships selling Greggs-branded product through Tesco and Iceland; and home delivery via Just Eat and Uber Eats.

Greggs put out its interim update on 29 July, bringing the results up to 27 June. Total sales rose from £1,027.7m to £1,101.5m — an increase of 7.2%, which seems fairly impressive to me, albeit like-for-like sales in the company-managed shops were up only 2.1% (and 1.3% in the franchised shops). The board’s expectations for the full year are unchanged.

Interim results — H1 2026 vs prior years

Pre-tax profit of £76.0m is only £1.9m above where it stood two years ago in the first half of 2024. The 19.7% increase is a recovery against a soft period — 2025 was a difficult year for them. The company says so itself: profit growth reflects the soft comparator, growth in the grocery business, strong cost control and the phasing of cost inflation. Cost inflation ran at just 2.2% in the half, which helps explain the margin improvement, and they’ve delivered £7m of the £11m of structural cost savings targeted for the year.

Of the £73.8m of additional sales: £18.3m came from like-for-like growth in the company-managed shops (the +2.1%); around £34.3m came from new and relocated company shops net of closures; and £21.2m came from the business-to-business channel — franchise sales plus the grocery retail partnerships — which grew 18.2% to £137.5m.

So roughly a quarter of the growth is same-store trading, nearly half is estate expansion, and close to a third is the business-to-business channel. Like-for-like sales aren’t really backing up the growth by normal means — it’s growth by opening more stores and by pushing product through partners’ shelves. The business-to-business channel is also the more profitable: its trading profit rose 24.5% to £38.1m, a 27.7% margin on its revenue against 12.5% in company-managed retail.

The estate grew by 34 net openings in the first half, or 1.2%, to 2,773 shops — 65 gross openings (including 27 franchised units and 17 relocations) less 31 closures. They feel they still have the ability to reach 3,500 UK shops, which would be a 26% increase on the current estate, and the new Derby and Kettering distribution centres are being built to serve that.

They might say they have the opportunity to grow the estate significantly further, but I’d comment that on this half’s figures alone it would take them ten years to get to 3,500 — they’re not working very hard to reach that level of openings. In fairness to the company, they’re projecting a more productive second half: 100 to 110 net new shops for 2026 as a whole, plus around ten ‘Greggs Express’ self-service trials, and they expect to keep opening at least 100 net shops a year over the medium term. At that guided rate the 3,500 target is around seven years out — still a long time.

The character of the openings is changing, which matters for store saturation. Over half of new openings are now beyond the high street — petrol forecourts, supermarkets, retail parks, hospitals and university campuses — and 62% of the half’s new shops went into areas with no other Greggs within a mile (up from 53%). Where there is an existing shop nearby, the sales transfer has averaged under 5%.

They’re also trialling the smaller ‘bitesize Greggs’ format (four opened, four more due), the ‘Greggs Express’ self-service offer with a convenience franchise partner, and stations: Birmingham New Street has been relocated to a bigger unit, with Liverpool Lime Street, London Euston and London Victoria to come in the second half. And they’ve opened their first international travel hub shop, in Tenerife South Airport with Lagardère Travel Retail. I don’t really understand why they’ve bothered with that — I can’t imagine there’ll be a huge rush of demand for Greggs products at a single store in Tenerife, and it’s not even a major hub airport for properly testing general demand. The company says the first few weeks of trading there have been encouraging.

Coverage is already close to blanket — the North East heartland, Yorkshire, the Midlands, the central belt of Scotland, London and South Wales are all dense — and I’m just a bit aware that they already have very good coverage across the United Kingdom. Where realistically are they going to roll out more and more stores?

The company’s answer is: forecourts, travel hubs, and smaller formats in locations a full shop can’t justify. That’s a credible answer for a few hundred more sites; whether it stretches to 727 more is possibly questionable, and their current rate of expansion concerns me. If they truly believe there is space for the brand in so many locations, I would expect them to be rolling out stores faster.

The interim results talk up the grocery channel but don’t give volumes or revenues for it, and that remains the case right through their statement — grocery sits inside the business-to-business segment alongside franchise sales, with no separate split.

What can be said with numbers: the business-to-business channel as a whole grew 18.2% (£21.2m) in the half and its trading profit rose 24.5%, and the company names the grocery business as one of the drivers of the profit improvement. What they describe: the ‘Bake-at-Home’ range launched in Tesco in September 2025 and has since expanded in range and distribution; the Iceland range has been extended, including Margherita and Pepperoni pizzas; the Vegan Sausage Roll has gone into larger Tesco stores and two products into Tesco’s smaller formats.

Selling into the retail space is where I’d see greater potential value than international expansion.

Home delivery made up 6.9% of the sales mix in the first half, up slightly from 6.8% a year earlier, and three-quarters of company-managed shops now sell via Just Eat and Uber Eats. I find this a little surprising, as the company’s products don’t really strike me as the obvious purchase from home — but 6.9% of sales from effectively nothing, sales that wouldn’t be achieved elsewhere, is good.

The basket value of a delivery order runs around three times a walk-in purchase, the evening is where the delivery market is strongest, and the company has adapted products to suit the channel — the boxed pizzas being the clear example.

Gross margin strengthened marginally to 62.01%, which I’d deem reasonably good given the general headwinds on company costs over this period. Distribution and selling costs and administrative expenses stayed roughly in line as a share of sales, which meant operating profit increased 22.9% to £86.5m — a very good result — and basic earnings per share rose 20.8% to 55.1p. Very good, and especially welcome given earnings per share were significantly lower in 2025 than 2024.

Two cautions for the second half, both from the company’s own guidance: around £10m of extra operating costs land as the new Derby distribution centre goes live, and they state that second-half profits are expected to reduce year-on-year absent a recovery in the consumer backdrop. The first-half cost-saving tailwind is also expected to fade. July trading, for what it’s worth, accelerated and is running ahead of the company’s internal expectations as cooler weather brought customers back.

Six-year financial history

Revenue growth has slowed every single year since the reopening surge — 51.6%, 23.0%, 19.6%, 11.3%, 6.8% — and earnings per share have been under pressure, drifting down from the 2024 peak. This year’s 20% earnings recovery is great and all, but it’s a recovery, not a new trajectory.

I think the company are very well run. They’re coming up with a lot of legitimate updates to the menu, the store expansion is disciplined, and they’re one of the few retailers of their sort that keeps pushing out good numbers in a difficult market — taking share of visits (up 0.3 points to 8.7%) while the wider food-to-go market shrank.

But the like-for-like increases aren’t really backing up growth by normal means — it’s growth by opening more stores — and at some stage I have to query how many more stores you can realistically roll out, given the coverage they already have.

I don’t think the offering lends itself naturally to international expansion; if it did, the sensible route would be high-footfall core locations and major airport hubs in Europe — just not Tenerife — and translating the Greggs brand for an international market is a big ask. Of greater potential value is selling into the retail space, Tesco and the like. Into the longer term, I’m not sure they can keep up this year’s level of profit growth, and the slowing revenue history supports that concern.

I’m not basing this on the full-year earnings per share figure itself, but on an expectation that the full-year figure comes in about 15% higher than a year ago, which gives an earnings override of 141.22p per share. I’m applying a growth rate of 7% — which might be a little harsh on a company that’s just pulled out a 20% earnings increase, but I sense that pace won’t continue into the longer term — with a valuation multiple of 8, no uplift or reduction, and a 20% risk factor.

One thing to be aware of on the override: the company itself guides second-half profits to reduce year-on-year as the Derby costs land, and a 15% full-year increase implies the second half growing around 11% — so the override embeds a stronger second half than management’s own guidance.

VALUATION SNAPSHOT

This gives a valuation of 1,762.43p against a current share price of 1,946.00p — a value opportunity of −9.4%. The shares sit modestly above what I’d pay: the market is capitalising this year’s earnings recovery at close to 16 times, while the underlying growth engine is store openings into an already well-covered map, with slowing revenue growth behind it and a guided softer second half ahead. A well-run company at a slightly full price.

• The guided softer second half: Management expects second-half profits to fall year-on-year as roughly £10m of Derby distribution-centre costs land and the cost-saving tailwind fades. My earnings override assumes a stronger second half than the company itself guides.
• Estate saturation: Coverage is already near-blanket. If the 3,500-shop runway proves shorter than management believes, the main growth engine stalls — and it is the engine doing roughly half the work.
• Thin like-for-like growth: At 2.1%, same-store trading is barely ahead of inflation. Growth bought through openings requires continuous capital; growth earned in existing shops does not.
• Consumer backdrop: The wider food-to-go market shrank. Greggs is taking share, but a weak consumer caps how far that can carry it.
• Rising net borrowing: Net borrowing has climbed from £110m (FY2022) to £404m (FY2025) as the estate and distribution network expand.
• International as a distraction: The Tenerife airport shop is a curious use of management attention, and translating the brand abroad is a big ask.

• Like-for-like acceleration: If same-store sales moved meaningfully above 2%, the growth would stop depending on the shop count and the valuation case would change materially.
• A faster opening rate: Openings running well ahead of 100 a year would make the 3,500 target credible on a timescale that matters, rather than seven-plus years out.
• Grocery disclosed separately: The business-to-business channel earns a 27.7% margin against 12.5% in retail. If grocery is scaling fast within it, separate disclosure would likely justify a higher multiple.
• A better entry price: At −9.4% this is close. A modest pullback, or the second half beating the cautious guidance, would flip this to a buy.
• Delivery growing beyond 6.9%: High-basket incremental sales at three times walk-in value would be a genuine second engine.