Investing.com -- Greggs (LON:GRG) on Thursday saw its shares tumble by more than 10% following its trading update that reported slowing growth in like-for-like sales and cautious forward guidance.
The company reported a 2.5% rise in like-for-like sales for the fourth quarter, a noticeable slowdown compared to 5% growth in the third quarter and 7.4% in the first half of the year.
The weaker performance appears to reflect broader consumer challenges rather than a temporary dip.
Analysts at Jefferies noted that the softer trading environment in July and August, previously seen as a potential blip, now seems to represent a more persistent trend.
“Lower consumer confidence impacted High Street footfall and industry-wide visits and expenditure,” the company said in a stock exchange filing.
However, the company maintained its market share in terms of customer visits, suggesting that the challenges are industry-wide rather than specific to Greggs.
Despite the slower momentum, the UK bakery and food-on-the-go chain remains optimistic about meeting full-year expectations for 2024.
The company said that its expansion strategy continues apace, with plans to open 140-150 net new stores by the end of the year.
This includes a record 226 gross new openings, underscoring the brand’s long-term growth ambitions.
“Looking into 2025, employment costs will result in further overall cost inflation, although wage increases should provide support to consumers,” the company added.
Jefferies analysts flagged concerns that the softer fourth-quarter results may carry over into the first half of 2025.
They suggested that consensus profit growth estimates for 2025 may need to be revised down to around 5% or lower, reflecting the challenges posed by weaker consumer spending.
“The group has maintained market share though, suggesting this is a market-wide slowdown, rather than a Greggs specific issue. Whilst the economic data points to a better than perceived consumer in FY25, confidence continues to point lower,” said analysts at RBC Capital Markets in a note.