Weight-loss jabs threaten Greggs’ growth, analysts warn

Heathrow has said passenger numbers were 60% lower in November than before the coronavirus pandemic and there were “high cancellations” among business travellers concerned about being trapped overseas for Christmas as Omicron spreads. The UK’s largest airport said the government’s travel restrictions had dealt a fresh blow to travel confidence and predicted it was likely to take several years for passenger numbers to return to pre-pandemic levels. This week ministers said passengers arriving in the UK would have to take a pre-departure Covid test, as well as a post-flight test, because of fears about the spread of the new variant. “[The] high level of cancellations by business travellers concerned about being trapped overseas because of pre-departure testing shows the potential harm to the economy of travel restrictions,” the airport said in an update. Heathrow said the drop in traveller confidence owing to the new travel restrictions had negated the benefit of reopening the all-important corridor to North America for business and holiday travel last month. Eleven African countries have been added to the government’s red list, requiring travellers to quarantine before reuniting with families. “By allowing Brits to isolate at home, ministers can make sure they are reunited with their loved ones this Christmas,” said John Holland-Kaye, the chief executive of Heathrow. “It would send a strong signal that restrictions on travel will be removed as soon as safely possible to give passengers the confidence to book for 2022, opening up thousands of new jobs for local people at Heathrow. Let’s reunite families for Christmas.” Heathrow said that if the government could safely signal that restrictions would be lifted soon, then employers at Heathrow would have the confidence to hire thousands of staff in anticipation of a boost in business next summer. The airport is expecting a slow start to 2022, finishing next year with about 45 million passengers – just over half of pre-pandemic levels. This week Tui, Europe’s largest package holiday operator, said it expected bookings for next summer to bounce back to 2019 levels. However, Heathrow said on Friday not to expect the aviation industry to recover for several years. “We do not expect that international travel will recover to 2019 levels until at least all travel restrictions (including testing) are removed from all the markets that we serve, at both ends of the route, and there is no risk of new restrictions, such as quarantine, being imposed,” the airport said.

The growing use of weight-loss injections could dent demand for sausage rolls and pastries at Greggs, potentially depriving the bakery chain of some of its most lucrative customers, according to City analysts.

The warning comes as Greggs continues to grapple with slower sales growth since mid-2024, a period that has prompted investor speculation over whether the UK has reached “peak Greggs”. The company has attributed its softer performance to fragile consumer confidence and last summer’s unusually hot weather, which reduced footfall, while some shareholders have questioned whether its rapid store expansion has begun to cannibalise like-for-like sales.

Analysts at Jefferies have now added another potential headwind: the rising popularity of weight-loss drugs such as Mounjaro and Wegovy. In a note to clients, the broker said the trend could represent an “enduring challenge” for Greggs and weigh on its longer-term growth prospects.

The drugs work by mimicking the GLP-1 hormone, which suppresses appetite and increases feelings of fullness. Jefferies pointed to US research suggesting that users of such treatments tend to cut back particularly on high-calorie, ultra-processed savoury foods, a category that includes many of Greggs’ core products.

The analysts estimate that as many as four million people in the UK may now be using weight-loss jabs, equivalent to around 7.5 per cent of the adult population.

“It may only be 10 per cent of GLP-1 users that would shop at Greggs,” the Jefferies team said. “But that 10 per cent would be high-BMI individuals consuming lots of calories and, we would infer, likely some of Greggs’ best customers. Those customers could go from being among the most valuable to potentially never spending a penny with the business again.”

Roisin Currie, Greggs’ chief executive, acknowledged last month that there was “no doubt” weight-loss injections were having an impact on consumer behaviour. In response, the chain has begun expanding its healthier ranges, including products such as egg pots, to reflect shifting preferences.

Despite those efforts, Jefferies said the spread of weight-loss drugs should be seen as a “structural issue” rather than a passing trend. The broker cut its forecasts for Greggs’ like-for-like sales growth and profit margins and downgraded the stock to “hold” from “buy”, underlining the growing uncertainty facing one of Britain’s most recognisable high-street brands.