Shares in food-on-the-go retailer Greggs (GRG) jumped 16.5% to £20.64 on Monday after management upgraded full year profit guidance.
Weak footfall may be a problem for other high street retailers, as demonstrated by October’s BRC-Springboard footfall survey, yet Greggs continues to lure hungry consumers into its stores with new, competitively priced products and extended opening hours.
STILL ON A ROLL
In an unscheduled trading update, Greggs said it now expects 2019 full year profit before tax (excluding exceptional charges) will be ‘higher than our previous expectations’, prompting broker Canaccord Genuity to upgrade this year’s adjusted pre-tax profit estimate from £105.5m to £110m.
The value sandwiches-to-sausage rolls seller reported surprisingly strong like-for-like sales growth of 8.3% over the six weeks to 9 November, with same-store sales holding up well in the face of toughening prior year comparatives. This means that like-for-like sales for the year-to-date have now grown by an impressive 9.2%, while Greggs’ total sales are up 13.4%.
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Guided by chief executive Roger Whiteside, Greggs explained that ‘sales growth continues to be driven by increased customer visits and has been stronger than we had expected given the improving comparative sales pattern that we saw in the fourth quarter last year.’
Investors have regained an appetite for Greggs’ high-flying shares, confidence having been knocked by a sales growth slowdown for the third quarter.
MORE THAN A ONE TRICK PONY
Russ Mould, investment director at AJ Bell, commented: ‘Today’s update suggests food-on-the-go firm Greggs is more than a one-trick pony. Having got on something of a roll with its vegan version of a pastry favourite, the company had until today stalled on a lack of earnings upgrades since the summer.
‘The vegan sausage roll phenomenon which dominated the start of 2019 for the company might still be having some lasting impacts in terms of brand awareness but there’s no mention of it having direct impact in today’s short but sweet update.
‘Despite a tough comparison against strong trading in the same period a year ago, it is impressive that recent trading has been sufficiently encouraging to drive an increase in full year profit guidance.’