Greggs (GRG) shares surged 15% on Tuesday after the bakery chain delivered a better-than-expected first half, giving investors fresh confidence that its recovery is gathering pace despite a cautious consumer backdrop.
The biggest boost came from stronger profits and the prospect of improved cash returns. Greggs reported pretax profit of £76.0 million for the first six months of the year, up 20% on last year and ahead of market forecasts, while revenue rose 7.2% to £1.10 billion.
Operating profit also comfortably beat expectations, helped by good cost control, growth in its grocery business and lower cost pressures than many had anticipated.
Investors also welcomed plans to reduce capital expenditure this year to £180 million from £200 million. With the business continuing to generate strong cash, Greggs said the lower investment spend should create scope for additional shareholder returns, a message that clearly resonated with the market.
Like-for-like sales increased 2.1% across company-managed shops, with franchised stores also growing, while new openings continued to add momentum. Greggs opened a net 34 shops during the first half, taking its estate to 2,773 locations, and still expects to add between 100 and 110 net new stores this year.
The company has also been widening its appeal beyond its traditional sausage rolls and pastries. New products such as high-protein salads and iced matcha lattes are aimed at attracting younger and more health-conscious customers, while home delivery continues to grow and now accounts for almost 7% of sales.
Although Greggs left its full-year profit guidance unchanged and warned that investment in its supply chain is likely to weigh on second-half earnings unless consumer confidence improves, investors were happy to focus on what had already been delivered.
The interim dividend was maintained at 19.0p per share and management said stronger cash generation should provide greater flexibility over future shareholder returns.
Chief executive Roisin Currie said the business had bounced back from a difficult 2025 with improved sales and disciplined cost control.
For investors, the combination of earnings ahead of expectations, lower planned spending and confidence in the company’s cash generation proved more than enough to send the shares to their highest level in more than a year.