Greggs PLC (LSE:GRG) has been downgraded by RBC Capital Markets as it believes further price increases could deepen the bakery chain's decline in sales volumes.
RBC's rating was cut to 'sector perform' from 'outperform' following the company's half-year results, although the price target was lifted to 1,960p from 1,830p. The last close price was 2,032p.
Analyst Ross Broadfoot said Greggs had protected its profit outlook for the 2026 financial year through cost controls, easing inflation and an 18% increase in grocery sales.
However, he warned that additional savings would become harder to find after an expected £11 million of reductions this year. Food and packaging costs remain unhedged, while only half of Greggs' expected electricity use is covered against price movements.
Greggs has raised prices by around 4% this year and may need another increase if inflation accelerates towards the end of 2026 and into 2027. RBC said this could place further pressure on sales volumes.
Customer visits across the food-to-go market fell 1.9% during the first half, broadly matching the approximately 2% decline in like-for-like volumes at Greggs.
Broadfoot said this suggested the company was at least maintaining market share and that new shops were not taking substantial sales from existing locations. However, a slower pace of openings was "ultimately not a good sign".
The analyst increased his 2026 underlying pre-tax profit forecast by around 2% but reduced its 2027 estimate by 1%.
He concluded that Greggs remained cyclically rather than structurally challenged, but said it was "hard at this point to see what fuels a recovery".
