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Proudly owning Greggs (LSE:GRG) shares is proving to be a painful expertise of late. I do know this all too effectively, as somebody who opened a place within the firm in late November.
Dangerous information typically is available in threes, as they are saying, and Greggs’ share worth has been pounded by a triple dose of alarming buying and selling updates because the autumn. It toppled once more on Tuesday (4 March) as buyers digested the agency’s full-year buying and selling assertion.
Somebody who invested £10,000 in Greggs shares a yr in the past would now have simply £6,964 to point out for his or her funding. So ought to current buyers minimize and run? Or is now the time to contemplate loading up on the baked items big?
Forecasts topped
Full-year numbers from the FTSE 250 agency have been really a bit higher than analysts had predicted. But Greggs shares nonetheless slumped one other 8.6%.
At a shade over £2bn, revenues rose 11.3% in 2024 to new file highs. Underlying working revenue of £195.3m really topped Metropolis expectations by £1m-£2m, and represented a 13.7% yr on yr improve.
Pre-tax revenue rose 8.3% from 2023 ranges, to £203.9m. Internet money and money equivalents stood at £125.3m, down from £195.3m a yr earlier.
Continued profitability and steadiness sheet resilience inspired Greggs to hike the full-year dividend, to 69p per share from 62p beforehand.
Gross sales slowdown
Sadly Greggs’ assertion additionally confirmed the development of weakening gross sales progress has proceed. Like-for-like gross sales progress in company-managed outlets was simply 1.7% within the first 9 weeks of 2025.
To place that into context, corresponding gross sales progress throughout the entire of 2024 was 5.5%. By the fourth quarter it had dropped to 2.5%. Gone are the times the baker used to get pleasure from double-digit like-for-like revenues progress which, in flip, has led to an unsurprising re-rating of Greggs shares.
At this time, they command a price-to-earnings (P/E) ratio of 13.3 instances. That’s a far cry from a studying of 22-23 instances they carried simply six months in the past, a premium that mirrored the corporate’s vibrant progress outlook.
On the plus aspect…
With labour prices rising (although greater Nationwide Insurance coverage contributions and the Nationwide Residing Wage hike), and difficult financial situations impacting retail spending, Greggs has some vital challenges within the close to time period.
However I’d argue that Greggs isn’t fairly the binfire that its share worth drop suggests. In actual fact, I feel there are nonetheless causes for buyers to really feel optimistic.
Given the broader shopper setting, progress of 1.7% at first of 2025 could also be thought of a strong end result. Encouragingly, the corporate has stated it had loved “improved buying and selling in February” following the weather-affected January too.
The corporate’s progress technique additionally continues to provide tasty rewards. Elevated funding in digital is paying off, driving supply gross sales 30.9% greater in 2024.
Elsewhere, night buying and selling stays brisk, the enterprise noting that “post-4pm buying and selling [is again] the quickest rising daypart“. No marvel then, that Greggs continues to be extending buying and selling hours throughout a rising variety of outlets.
Lastly, the retailer is concentrating on 140-150 web store openings in 2025 to assist it develop earnings. These will likely be concentrated in doubtlessly profitable locations like retail parks, rail stations and supermarkets too, as Greggs’ pivot from the moribund excessive road continues.
Following their worth re-rating, I feel Greggs shares are price a detailed look from savvy buyers.
