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A strengthening picture

Update | Food & Drink | 04 Oct 2017

Greggs’ strong sales quarter reflects its secure place in the value sector of an increasingly edgy retail market. But it is also driven by a range of factors including menu development, estate upgrade, store ordering, and extensions to the range of dayparts and locations. With margins carefully controlled and wastage from the new ordering system starting to reduce, we expect those factors to continue to propel the company to outperformance within a constrained wider economy.


In balance

Update | Food & Drink | 09 Aug 2017

Greggs’ interims show a company in balance in several ways. First, operational and site development initiatives are driving consistent sales growth despite a challenging market. Second, the balance between low-price value and perceived quality is allowing it to cover peak input cost increases without a serious impact on margins. Third, the financial model is operating to support the dividend with a stable balance sheet.


Brand transformation rolls out cash

Outlook | General Retailers | 14 Mar 2019

Greggs' substantial progress with the brand transformation, backed by savvy use of social media, helped to deliver robust FY18 results, in spite of weather extremes, and an outstanding start to FY19. Consequently we have upgraded our forecasts three times since late November. The company is highly cash generative and likely to distribute part of the substantial cash balance (FY19e: £92.9m) with the H119 dividend.


On a roll - unscheduled vegan-driven upgrade

Update | Food & Drink | 19 Feb 2019

After only seven weeks, Greggs’ vegan sausage roll has already led us to an upgrade, our third in two months. With its smart approach to social media, the company is succeeding in disrupting out-of-date perceptions, which appears to be bringing new customers into the stores. While multiples are optically high, we believe there may be further upgrade potential.


An exceptionally strong end to the year

Update | Food & Drink | 09 Jan 2019

Greggs, the leading food-on-the-go retailer, has continued an impressive upwards trend in like-for-like (lfl) owned-store sales growth across Q4, and in the final five weeks of FY18e. The company is successfully drawing new customers into its stores with strategic product launches and efforts to reduce queues and improve product availability. We upgrade both our FY18 and FY19 PBT forecasts for the second time in six weeks, by 3%.


Raising earnings expectations

Update | Food & Drink | 28 Nov 2018

An unscheduled trading upgrade confirms impressive stronger than anticipated sales growth in October and November, on the back of a robust Q3 and tough prior year comparatives. Cautiously factoring in slightly weaker Christmas trading as shoppers increasingly favour buying online, we raise our FY18e PBT by 6.4%. Our valuation increases to 1,516p.


Greggs passes the scorch test

Update | Food & Drink | 09 Oct 2018

Greggs’ sales growth has accelerated through each quarter, in defiance of the summer 2018 heatwave conditions that turned many retailers’ performances on their heads. Greggs has passed the scorch test, thanks to the change strategy that the brand has quietly achieved: a change in its locations, its value menus, its customers and its trading dayparts. This result is significant and should help challenge out-of-date assumptions about Greggs. We retain our 1,360p valuation.


Transformation taking shape

Update | Food & Drink | 03 Aug 2018

Greggs’ interim results, against a backdrop of extreme weather conditions, reinforce progress with the strategic transformation of the brand into a leading ‘food-on-the-go’ format. Innovative new product ranges, a reduced dependence on high street footfall and a major overhaul of the supply chain are creating a solid platform for the next stage of the journey. We forecast strong cash generation and a return to earnings growth in 2019.


Growth moderates, but strategy on plan

Update | Food & Drink | 10 May 2018

Greggs’ management has been open in recognising that despite the Beast from the East and other extraordinary weather patterns, there is an underlying softening of demand. We have reduced forecasts, but see earnings growth continuing from a combination of like-for-like sales, shop expansion, and investment in the estate and manufacturing and fulfilment infrastructure. Greggs’ value positioning should place it well in a tight consumer market, and at these levels the valuation is attractive.


Value discovery

Outlook | Food & Drink | 14 Mar 2018

Five years into its strategy, there is plenty for Greggs to do. Its shops, which all now look and work like value food-on-the-go outlets, must spread out from their high street origins. Its manufacturing bases are being transformed, at substantial projected returns. But most importantly, its wide-ranging food offer will take time to be known by non-customers, we believe. Their gradual buy-in should provide a tailwind to Greggs’ mission to gain share.


Positive outlook

Update | Food & Drink | 16 Jan 2018

Greggs' Q4 sales update demonstrates a robust performance in what has been a tough retail market. The company's self-help strategy shows that this is a business firmly in control of its own destiny. Management expects that the industry-wide cost pressures seen in 2017 will continue in 2018 although at lower levels. Greggs expects to deliver full year results in line with management expectations. A combination of strong trading momentum, easing margin pressures and continued self-help gives us confidence in our 2018 forecasts, which we leave unchanged.


Promising performance, strengthened proposition

Update | Food & Drink | 22 May 2017

Greggs has traded strongly for the first 19 weeks, and self-help measures such as refurbishments, openings, manufacturing rationalisation and product development continue to offer potential. Whether switching customers would be a net benefit in a consumer squeeze is uncertain, but the proposition is considerably stronger than when real wages were last negative. We retain our forecasts and valuation.