RBC Capital Markets has downgraded Greggs PLC (LSE:GRG) following the bakery chain’s half-year results, warning that further price increases could worsen an ongoing decline in sales volumes.
The bank cut its rating on Greggs to “sector perform” from “outperform,” though it simultaneously raised its price target to 1,960p from 1,830p, against a last close price of 2,032p.
Analyst Ross Broadfoot acknowledged that Greggs had managed to protect its profit outlook for the 2026 financial year through a combination of cost controls, easing inflation, and an 18% increase in grocery sales.
Despite those positives, Broadfoot cautioned that additional cost savings would become increasingly difficult to secure after an expected £11 million of reductions already pencilled in for this year.
Food and packaging costs at Greggs remain unhedged, adding further vulnerability to inflationary pressures that could emerge later in 2026 and into 2027.
Only half of the company’s expected electricity usage is currently covered against price movements, leaving a meaningful portion of its energy costs exposed to market fluctuations.
Greggs has already raised prices by around 4% this year, and RBC warned that another increase may be necessary if inflation accelerates towards the end of the year, potentially placing further pressure on customer volumes.
Broader market data showed that customer visits across the food-to-go sector fell 1.9% during the first half, broadly in line with the approximately 2% decline in like-for-like volumes recorded at Greggs.
Broadfoot noted that the alignment between market-wide footfall declines and Greggs’ own figures suggested the company was at least holding its market share, and that new store openings were not significantly cannibalising sales from existing locations.
However, he added that a slower pace of new shop openings was “ultimately not a good sign” for a business that has long relied on network expansion as a key growth driver.
RBC increased its 2026 underlying pre-tax profit forecast for Greggs by around 2%, while trimming its 2027 estimate by 1%, reflecting near-term resilience but growing caution about the medium-term outlook.
Broadfoot concluded that Greggs remained cyclically rather than structurally challenged, but said it was “hard at this point to see what fuels a recovery” as cost pressures and pricing constraints continue to weigh on the business.
