News Column

Greggs is earning its crust with a shift to more food-on-the-go

July 2, 2014


SHARES in bakery chain Greggs jumped 3.8 per cent yesterday after the company said it was expecting a forecast-beating 48 per cent surge in first-half profits, driven by its turnaround plan.

Under chief executive Roger Whiteside, who joined last year, the company has been shifting away from its roots in the dwindling bread business and focusing on food-on-the-go by extending trading hours and increasing its range of lunch and breakfast deals.

The Newcastle-based chain said total sales rose 3.1 per cent in the 26 weeks to 28 June while sales at stores open more than a year were up 3.2 per cent compared with a 2.9 per cent drop in sales last year.

Greggs revamped 131 shops in the period, in line with its plan to refit around 200 shops this year. It also opened 26 new shops and closed 36, some of which were freehold, helping generate £1.4m of profits.

Following the strong performance, Greggs said it expected to report operating profits of around £16m-£17m when it announces its interim results on 30 July. This compares with £11.5m last year.

The group warned that sales in the second half faced tougher comparatives on last year, though it expected to make further progress with its strategic plan.

ANALYST VIEWS WHAT DID YOU MAKE OF GREGGS' FIRST-HALF PRE-CLOSE STATEMENT? By Kasmira Jefford MARK HODGES EDISON INVESTMENT RESEARCH We had an encouraging interim statement from Greggs. Sales comparables strengthened in the second half, but the company continues to expect to make solid progress, and the risk of further cost inflation is reducing. We continue to like the stock and have a fair value of 597p.

DARREN SHIRLEY SHORE CAPITAL Greggs' surprise trading update confirmed robust trading had been sustained through the first half, resulting in upgrades to full-year expectations. We upgrade our full-year pre-tax profit forecast by around six per cent to £46.4m, which we expect to be at the upper end of market expectations.

SAHILL SHAN N+1 SINGER EQUITY RESEARCH There is good news on like-for-like sales, overall cost control and input cost inflation for the second half. In short, the update is supportive of the investment case… Admittedly, it will be lapping some of the self-help initiatives and stronger comparatives in the second half, but we feel Greggs is on the front foot.

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Source: City A.M. (UK)

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