Greggs’s sales boost impresses City
Own shop like-for-like sales were up by 3.9% so far this year, with total sales growth of 3.5%.
Greggs reported completing 153 store refits, opening 32 new shops opened and closing 43 outlets.
‘Excellent trading update’
City analyst Shore Capital said the food-to-go specialist had delivered “a quite excellent trading update …” The result was all the more remarkable after the British Retail Consortium reported high-street footfall was 2.8% down in August year-on-year, said Shore Capital analysts Clive Black and Darren Shirley.
“Greggs’s performance reflects an amalgam of factors that help boost the top-line, including what management believes are near perfect weather conditions …” said Black and Shirley. Other factors contributing to the result were: the store refit programme, the removal of under performing stores, the success of modernised ranges such as the Balanced Choice sandwich offer and lower commodity prices, particularly flour together with an easing of oil prices.
Shore Capital lifted it estimate for current pre-tax profit from £46.4M to about £52M, excluding £1.4M of property profits. Stronger earnings before interest and tax also implied better cash generation from the group, said Black and Shirley. They raised their £18M net cash to about £32M.
“Progress in financial year 2015 may be a little less dramatic but the bais to expect further earnings and dividends growth is stronger, while rising cash balances materially boost the financial robustness of the group,” said the analysts. They lifted their recommendation on Greggs stock from ‘hold’ to ‘buy’.
Lifted its recommendation
Analyst N+1 Singer agreed that Greggs’s third-quarter trading performance was much stronger than expected, placing full-year profit before tax significantly ahead of management’s expectations.
Its analyst Sahill Shan lifted his profit before tax forecast for the current financial year by 10.5% to £54.5M, which represented a 35% cumulative rise since this January. If achieved, this would top Greggs' previous record of £53M in 2011.
Greggs's chief executive Roger Whiteside said the sales boost reflected customers responding to new product initiatives, improved service, better value, shop refurbishments and more favourable trading conditions.
“While we face tougher comparatives in the final quarter, the combination of strong sales performance, lower costs and our outlook for the remainder of the year means that we now anticipate full year profits to be materially ahead of our previous expectation,” said Whiteside.
Greggs’s results – at a glance
• Own shop, like-for-like sales up 5.4%
• Year-to-date own shop like-for-like sales up 3.9%
• Total sales growth 3.5% year-to-date
• 153 refits completed
• 32 new shops opened, 43 closures
