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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.
Unhealthy information typically is available in threes, as they are saying, and Greggs’ share value 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 traders 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 traders reduce and run? Or is now the time to think about loading up on the baked items large?
Forecasts topped
Full-year numbers from the FTSE 250 agency had been truly 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 document highs. Underlying working revenue of £195.3m truly topped Metropolis expectations by £1m-£2m, and represented a 13.7% yr on yr enhance.
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 stability 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 take pleasure in 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 shiny progress outlook.
On the plus facet…
With labour prices rising (although greater Nationwide Insurance coverage contributions and the Nationwide Residing Wage hike), and hard financial circumstances 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 value drop suggests. The truth is, I feel there are nonetheless causes for traders to really feel optimistic.
Given the broader shopper atmosphere, progress of 1.7% in the beginning of 2025 could also be thought-about a strong outcome. Encouragingly, the corporate has mentioned it had loved “improved buying and selling in February” following the weather-affected January too.
The corporate’s progress technique additionally continues to supply 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 remains to be extending buying and selling hours throughout a rising variety of outlets.
Lastly, the retailer is focusing on 140-150 internet store openings in 2025 to assist it develop earnings. These shall be concentrated in doubtlessly profitable locations like retail parks, rail stations and supermarkets too, as Greggs’ pivot from the moribund excessive avenue continues.
Following their value re-rating, I feel Greggs shares are price an in depth look from savvy traders.
