Greggs PLC (LSE:GRG) could face another summer trading slowdown as the UK's prolonged heatwave weighs on demand for its core hot products like sausage rolls and steak bakes, according to Jefferies, even though the broker still expects solid first-half profits.
Ahead of interim results on 29 July, the FTSE 250-listed baker's pricing position is strong, the broker said, after a 4% increase at the start of the year.
Analyst Andrew Wade estimates the company's price inflation is broadly in line with the wider market, helping underpin margins while remaining competitive.
However, unusually hot weather has emerged as a fresh concern, with Wade noting that Greggs was forced to cut guidance last July after high temperatures reduced demand for products such as hot pastries and pizzas.
While he is not forecasting another profit warning, the analyst said he believes recent trading has softened and the prospect of a weather-driven summer boost has diminished.
It was also questioned whether Greggs' slower like-for-like sales growth reflects more than weak consumer confidence.
Management has blamed subdued retail footfall and cautious consumer spending.
But Wade argued that "the same symptoms could reflect the growing uptake of GLP-1s - evidence shows that the drugs most impact users’ desire for high-fat, calorie-dense snacking - and we have concerns that this could represent an enduring headwind for certain food-to-go operators, including Greggs".
Jefferies maintained its 'hold' rating and 1,610p price target, saying the business remains well positioned over the long term but faces a more challenging trading backdrop in the near term ahead of its results later this month.
