Story

The Full Story

Greggs has been telling, in essence, the same story since October 2021: more shops, more dayparts, more channels, more efficiency, the same ROCE, the same dividend cover. For three years the numbers obliged — sales doubled from £1.2bn to £2.0bn between FY21 and FY24, the estate cleared 2,600, and FY24 produced a record £204m pre-tax profit. In FY25 the script finally cracked. Underlying pre-tax profit fell 9.4%, ROCE collapsed from 20.3% to 16.0%, and the share price has lost roughly half its value from the early-2024 peak. Management credibility on operational delivery (CEO transition, supply-chain builds on time and to budget, market-share gains) is intact. Credibility on the valuation-load-bearing promise — the October-2021 plan to "double sales over a five-year period" by 2026 — has quietly slipped: the phrase appeared verbatim in three consecutive annual letters and is absent from the FY25 prelims and CEO report. The current chapter is a margin-and-capital trough being sold as a temporary intersection of cycle and capex peak. The bull case requires both to break the right way at once.

1. The Narrative Arc

Six years, three distinct chapters: the Covid shock, the Currie-era acceleration, and the 2025 reset. The chart traces sales and reported pre-tax profit alongside the inflection events that re-set the company's narrative.

The longer view matters because it shows how unusual FY25 is. Greggs has compounded sales for three decades almost without interruption — only Covid produced an absolute revenue decline, and even FY13 (a margin reset under outgoing CEO Ken McMeikan, before Roger Whiteside refocused the chain on food-on-the-go) saw sales rise 4%.

The Whiteside era (CEO 2013–May 2022) is the prior chapter that built the platform: a deliberate transition out of traditional bakery into "food-on-the-go," the closure of the Twickenham bakery (finally sold in 2024 for a £14m exceptional gain), the 2018 vegan sausage roll moment that became a viral-marketing case study, and the structural margin step-up visible from FY15 (operating margin recovered from 5.2% in FY13 to 8.7% in FY15 and held above 8% every non-Covid year since). Roisin Currie inherited the playbook in May 2022 and has executed it without strategic deviation; what she has changed is the scale of the capex bet behind it.

2. What Management Emphasised — and Then Stopped Emphasising

Read the CEO and CFO letters chronologically and three patterns emerge: (i) the "double sales by 2026" line ran like a metronome from FY21 through FY24 and then disappeared; (ii) "delivery" was the breakout 2020/21 story, was downgraded to a "rebased" channel in FY23, and is now a steady ~6.8% of sales mix; (iii) "evening" arrived in FY22 as the next horizon and is the one growth pillar the 2025 letter still actively promotes.

The most telling cell is the top-right zero. The "double sales over a five-year period" framing — first articulated at the October 2021 Capital Markets Day, repeated in the FY22 prelim, repeated in the FY23 review ("two years on … we are very much on track"), and re-affirmed in Currie's FY24 letter ("In 2021, we set our sights on doubling sales by 2026 … sales are on track") — is conspicuously gone from the FY25 prelim and CEO report. Sales of £2,151m vs. a notional 2x of FY21's £1,230m would require £2,460m, a number FY26 will not reach at the guided LFL run-rate (1.6% in the first nine weeks). Management has not formally retired the goal; they have simply stopped saying it, which is the historian's most common tell.

Two other dropped emphases: delivery (a 2021 headline; a 2023 mea culpa — "with the benefit of hindsight, it is clear that some of our early success in the food delivery market was a reflection of temporary pandemic conditions"; now flat at 6.8% of mix) and special dividends (paid in 2021, 2023, and 2024; absent in 2025, with management instead reserving the right to use share buybacks for the first time as the cash position normalises). New emphases that have moved up the page are structural cost savings (£10.6m in FY24, £13.0m in FY25, with explicit commitment to scale this lever further) and ROCE-recovery framing — the 20% target appears repeatedly in 2024–25 prose precisely because the actual ratio is now four points below it.

3. Risk Evolution

The risk register is one of the cleanest documents Greggs publishes; it has changed in three significant ways across the period and one of them was just introduced in FY25.

Three movements are worth pausing on:

• Brexit dropped, pandemic muted, climate de-prioritised. All three were near top-of-page in FY20–FY22; by FY25 climate has been formally judged "not a principal risk within the time horizon of our current plans." Pandemic remains in the viability scenario (modelled as a 30% revenue hit in a hypothetical Q4 2026 lockdown), but the language is procedural rather than urgent.
• Cyber / IT and allergens are now top-of-page. The FY25 chair statement explicitly references "the well-publicised issues faced by other retailers" — a thinly veiled nod to the 2025 cyber incidents that hit large UK chains during the SAP S/4HANA migration year — and dedicates Board agenda time to allergen processes. This is a textbook example of risk language tracking peer events.
• A brand-new "Financial Liquidity" principal risk appeared in FY25. This is the first new principal risk added in five years, and it follows a year in which net cash fell from £125.3m to £45.8m and the company drew on its RCF for the first time (£25m drawn at year-end). The disclosure is benign on the surface but the timing — alongside peak capex — tells you what the Board is now actually worried about.

4. How They Handled Bad News

There have been three real "bad news" episodes in the period: the Covid loss in FY20, the FY24 H2 LFL miss, and the FY25 weather/consumer profit reset. Greggs has handled all three with the same playbook: name it, quantify it, attribute it (mostly) to external factors, then reassert the strategy. The honesty quotient varies.

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The single quote that tells you most about Greggs' truth-telling style is the FY23 delivery climbdown: "with the benefit of hindsight, it is clear that some of our early success in the food delivery market was a reflection of temporary pandemic conditions." That sentence — written by a CFO who has been in seat since before IPO-era management norms changed — is unusually direct for a UK CEO/CFO letter and earns the company most of its honesty points. The FY25 letter, in contrast, contains no comparable mea culpa for either the doubling target or the FY25 ROCE pressure; the framing is "challenging market conditions … structural opportunities … our ability to weather these conditions." Where 2023 used hindsight to be candid, 2025 used it to externalise.

5. Guidance Track Record

Greggs guides on five things with any specificity: input cost inflation, net new shop openings, capex, ROCE, and the implied sales/profit trajectory through the doubling target. The track record is mixed: cost-inflation calls have been credible; estate growth has consistently met or exceeded; capex has run hot at the top of guided ranges; ROCE has now missed materially.

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Credibility score: 7/10. The deduction is concentrated in two places. First, the doubling-by-2026 ambition was repeated four years running, then quietly dropped in the year it became unattainable — the company has yet to formally release the goal or replace it with a new medium-term target. Second, the FY24 ROCE-dilution guidance ("modest" 2025/26 dip) understated the actual FY25 outturn (430 bps drop in one year) by a material margin. The 7/10 rather than something lower reflects the fact that Greggs has hit the cost inflation, capex envelope, and shop-opening guidance with unusual precision — and that the management team disclosed the FY24 LFL miss and FY23 delivery climbdown without analyst prompting.

6. What the Story Is Now

The current chapter of the Greggs story has three components — one bullish, one bearish, one to be determined.

De-risked. The supply-chain build that defines this chapter is essentially complete. The Balliol Park fourth line was commissioned in 2024 (+35% savoury rolls/bakes capacity). The Birmingham and Amesbury radial distribution centres were extended by end-2024 (+300 shops of capacity). Derby and Kettering have both been delivered "on time and on budget" — Derby goes live in H2 2026, Kettering in H1 2027. Together the network is now sized for ~3,500 shops, against 2,739 today — six to nine years of estate runway at recent opening rates. Capex peaked in FY25 at £287.5m and steps down to ~£200m in FY26 and £150–170m from FY27. Pension de-risking is done (Aviva buy-in completed FY24). The Twickenham legacy site is sold. The dividend has been held flat at 69.0p — explicitly during the investment phase, with the 2x-cover policy intact. None of these are the kind of items that go wrong from here.

Stretched. The FY26 guide is unusually candid: "profits at a similar underlying level to 2025, with any year-on-year improvement contingent on a recovery in the consumer backdrop." Translated: the in-year earnings line depends on a macro variable Greggs does not control. ROCE is 16.0% against a stated 20% target, with the FY25 MD&A explicitly warning ROCE will fall further in 2026 as Derby fixed costs land and stabilise in 2027 before recovering. The doubling-sales target has been silently retired without replacement. The free-cash position — net cash of just £45.8m, with £25m drawn on the RCF — is the lowest in years, and the 3% of revenue net cash policy means little buyback capacity in 2026 even if the option is now formally on the table. LFL growth in the first nine weeks of 2026 is 1.6%, below the 2.4% FY25 outturn.

To be determined. Whether Greggs is a structurally better business at the end of this capex cycle than it was going in. The bull case is straightforward: a 2,739-shop estate growing into 3,500-shop capacity, with App-loyalty share up from 8% to 27% of transactions, evening daypart still the fastest grower, market-share gains in a shrinking market (Greggs +50 bps to 8.6% while market visits fell 3.1%), and structural cost savings scaling from £10.6m to £13.0m year-on-year. The bear case is equally legible: gross margin has compressed every year for four years (from 63.6% in FY21 to 61.5% in FY25), the ROCE recovery requires both volumes and a Derby/Kettering ramp the company has never done at this scale, and the share price has spent the last 18 months telling you the market does not believe the recovery is automatic.

What to believe vs. discount. Believe management on operational delivery — the supply-chain build, the shop pipeline, the cost-savings programme, and the App-loyalty traction are happening as described and are independently verifiable from the trading updates. Discount the implicit promise that ROCE returns to 20% on a normal calendar; that requires both market recovery and capacity utilisation to compound in the right direction at the same time, neither of which is in management's control. The single most informative item to track from here is FY26 H2 like-for-like sales: if it stays in the 1–2% range, the Greggs story is structurally lower-margin than the post-Covid years implied; if it accelerates back through 4%, the doubling target was always a question of timing, not feasibility.