Bakery giant Greggs (GRG) reports a particularly strong Christmas and has now seen like-for-like sales increase for 13 consecutive quarters with food-on-the-go continuing to be the main driver.

Industry-wide cost pressures are likely to have a modest impact on margins in the short term, yet Greggs remains confident of further progress this year and the bullish fourth quarter update triggers a 3.6% share price advance to £10.37.

Click here to read today's year-end update from the value-for-money sausage rolls, doughnuts, coffees and sandwiches purveyor, in which CEO Roger Whiteside says full year results for 2016 will be 'slightly ahead of our previous expectations'.

FESTIVE FAVOURITES

Sales over Christmas were particularly strong, helping fourth quarter like-for-like sales from company-managed shops up 6.4%. Especially pleasing given a slowing in third quarter like-for-like growth, the performance takes same-store sales up 4.2% for 2016 as a whole.

Festive Bake

During the year, Greggs grew its estate to 1,764 shops; 145 new shops were opened and and 79 stores closed as the food retailer continued to re-position its estate away from shoppers and closer to the workplace and transport hubs.

'Customers enjoyed seasonal favourites such as our Festive Bake and traditional mince pies but our growing strength in food-on-the-go was the main driver of sales,' says the company, morphing from staid baker into a food-on-the-go brand with attractive growth potential.

'Our new 'Balanced Choice' bakes have proved popular along with hot food options such as our new burritos, and we will soon be extending our hot drinks range to include Vanilla Latte alongside Fairtrade Peppermint Tea and Green Tea.'

Peppermint Tea 1

CAUTIOUS OUTLOOK

In September, Shares urged buying on a pullback to 991.5p in the belief that positive like-for-like revenue growth would continue, supported by healthier ranges and shop refurbishments. Brexit-related blues and news of more subdued third quarter trading knocked the share price, which has subsequently rebounded, although we're not getting too carried away.

In his outlook statement however, Whiteside does flag 'greater uncertainty in the trading environment with increased pressure on real income growth. We also continue to expect some industry-wide cost pressures in 2017 and these are likely to have a modest impact on margins in the short term.'

Greggs - JAN 2017'2017 will be another busy year of change as we continue to progress our investment in better systems and the transformation and development of our supply chain. Over the medium term we are confident of making further progress as we implement our plan to grow Greggs as a modern food-on-the-go brand.'

Canaccord Genuity scribe Nigel Parson upgrades his 2016 sales and pre-tax profit estimates from £886m and £78m to £894.6m and £78.2m respectively, although he also downgrades his 2017 and 2018 profit forecasts to reflect incoming cost pressures.

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Issue Date: 17 Jan 2017