The UK’s favorite bakery chain, Greggs, is facing headwinds. The company reported a 17.9% drop in pre-tax profits to £167.4 million for the year ending December 27, 2025, sparking debate over whether the popular sausage roll and steak bake purveyor has reached its peak. Whereas total sales did increase by 6.8% to £2.15 billion, a slowdown in growth at established stores – up just 1.6% in the first nine weeks of 2026 – is fueling concerns about the future trajectory of the business. This comes as UK consumers grapple with a persistent cost of living crisis and changing spending habits, including a rise in the use of weight-loss treatments.
The question of “peak Greggs” isn’t new. Chief Executive Roisin Currie publicly dismissed the idea last year, stating she believed the company would continue to bounce back from economic downturns. However, the latest figures suggest a more challenging environment than previously anticipated. The company is now navigating a landscape where easing inflation hasn’t translated into the expected boost in consumer spending and grocery price inflation is, surprisingly, beginning to creep upwards again. The potential for further economic disruption, particularly from the conflict in the Middle East and its impact on energy prices, adds another layer of uncertainty.
Profit Slump Amidst Challenging Market Conditions
Greggs’ financial performance reflects broader economic pressures impacting UK households. The company, which employs over 33,000 people, acknowledged the difficulties faced by consumers, with disposable incomes squeezed by high energy and food costs. Despite the profit decline, Greggs maintained its commitment to its workforce, distributing a £20 million profit-share bonus – averaging £800 for employees on a 30-hour contract – similar to the previous year. This demonstrates a continued investment in its staff despite the challenging financial climate.
The slowdown wasn’t solely attributable to economic factors. Greggs noted that unusually hot weather during the year negatively impacted footfall and consumer behavior. However, the company is actively adapting to changing consumer preferences, expanding its delivery options, and extending shop opening hours to capitalize on evening trade – identified as its fastest-growing segment. These strategic shifts aim to mitigate the impact of external pressures and drive future growth.
Expansion Plans Continue Despite Economic Uncertainty
Despite the profit dip, Greggs remains committed to expansion. The company opened 121 net new stores in 2025, bringing its total estate to 2,739 locations. Looking ahead, Greggs is targeting approximately 120 further openings in 2026, with an ambitious long-term goal of exceeding 3,000 UK shops. This continued investment in physical locations signals confidence in the brand’s long-term appeal and potential for growth, even amidst economic headwinds.
The company is similarly benefiting from some positive financial adjustments. Currie anticipates inflation to fall to around 3%, roughly half the rate of the previous year. A reduction in business rates, following government adjustments in the autumn budget, is also expected to provide a boost. However, these gains will be partially offset by rising wage costs as the legal minimum wage increases.
Analyst Views Diverge on Greggs’ Future
Financial analysts are offering differing perspectives on Greggs’ long-term prospects. Darren Shirley, an analyst at Shore Capital, expressed caution, stating there was “little to shout about as trading slows.” However, Aarin Chiekrie, an equity analyst at Hargreaves Lansdown, offered a more optimistic outlook, emphasizing Greggs’ proactive approach to adapting to changing consumer preferences and expanding its reach through extended opening hours and delivery services. Chiekrie noted that “menus are being adapted to changing customer preferences, and shops are staying open later to cash in on more evening customers – the group’s fastest growing day-part.”
Greggs has proactively secured its energy costs, having agreed to a fixed price that will protect the business from potential price increases related to the Middle East conflict until 2027. This strategic move demonstrates a commitment to mitigating external risks and maintaining financial stability. The company’s ability to navigate these challenges will be crucial in determining its future success.
The current economic climate, coupled with evolving consumer habits, presents a significant test for Greggs. The company’s ability to adapt its offerings, manage costs, and continue its expansion plans will be key to proving that it hasn’t reached “peak Greggs” and can continue to thrive in the years to come. Investors will be closely watching the company’s performance in the coming months, particularly as the impact of rising grocery inflation and geopolitical instability unfolds.
Greggs is scheduled to provide its next trading update alongside its half-year results later in 2026. This will offer a crucial insight into the company’s performance and its ability to navigate the ongoing economic challenges.
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