Shares in food-on-the-go retailer Greggs (GRG) jumped as much as 5% to £26.86 in early trading after the firm hinted that earnings for this year could be well above its previous forecast, although by 10am they had eased back to £25.71 for a gain of 0.5%.
In a trading update, the firm said that following the easing of restrictions on non-essential retail it had expected trading to ease as competition from more cafes and restaurants opening their doors ate into its strong sales recovery.
While the level of pent-up demand has slightly tailed off, Greggs’ like-for-like store sales have been well above 2020 levels and even slightly (between 1% and 3%) above 2019 levels in recent weeks.
‘This level of sustained sales recovery is stronger than we had anticipated and, if it were to continue, would have a materially positive impact on the expected financial result for the year,’ the firm said.
Half-year results are due to be presented at the start of August, when the firm will provide more colour on its sales growth. The current consensus sees full-year sales of £1.12 billion, lower than 2019’s level of £1.17 billion.
Shore Capital’s director of research Clive Black, one of the few analysts to put a sell rating on Greggs pre-pandemic when the firm’s earnings revisions began to stall, said the pasty-seller had ‘bounced back exceptionally well’ and today’s update was likely to spur further upgrades to earnings estimates.
‘In acknowledging the virtues of the group, we have to make a call on how many more beats it can deliver and outline what is an appropriate valuation rating for the business,’ observed Black.
READ MORE ABOUT GREGGS HERE
