Greggs' value approach

Greggs’ no-nonsense, value approach has succeeded where others have struggled, despite broader pressures outside of its control.

Article updated: 5 October 2021 7:00am Author: Richard Hunter

The company remains understandably guarded on the outlook, with staffing and supply chain disruption still rampant. At the same time, inflationary pressures are elevated, especially in food, although the fact that the company has been forward buying has given Greggs some short-term protection.

Perhaps most impressively, despite the wider pressures and a society which has not yet fully returned to normal, Greggs’ like-for-like sales for the third quarter were 3.5% higher than the pre-pandemic period in 2019, with most recent trading also holding up as the figure was 3% ahead in September.

As such, the company is now guiding that its full-year numbers will now be better than previously expected, with its confidence in prospects previously having been displayed with the reintroduction of a dividend.

Even with this currently strong performance, the company is not resting on its laurels. An ambitious capital expenditure programme out to 2026 will peak in 2024, as Greggs targets 150 new store openings per year from 2022, with 100 expected this year. Equally, the online and delivery channels will also be receiving attention, while extended evening openings should also bring benefits.

Strategically, the company’s imaginative marketing ploys have also been successful, particularly the more recent vegan-friendly food and drink ranges, with themed offerings such as Halloween to follow. Greggs will also be outlining its plans for new stores at an upcoming Capital Markets Day, offering the fact in advance that pre-pandemic company-managed stores returned 42% on capital and franchised stores 33%.

Greggs’ return to form has been reflected in a share price which has risen 128% over the last year, as compared to a hike of 29% for the wider FTSE250. Investors remain convinced that the company’s growth still has far to go and the market consensus of the shares as a strong buy echoes this confidence in prospects.

More from Richard Hunter: read more articles directly on the interactive investor website.

These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees.

Richard Hunter

Head of Markets, interactive investor

Richard has over 30 years of stockmarket experience and is one of the UK’s foremost commentators on market matters and a regular contributor for the BBC (BBC News Channel, Wake Up to Money and the Today Programme), CNBC and Bloomberg. Richard’s expert commentary also appears across the national and specialist press. He previously held senior positions at Hargreaves Lansdown and NatWest Stockbrokers.

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