Greggs (GRG) is to expand further into the growing £6bn food-on-the-go market in a bid to attract customers back into its shops. The strategy will see fewer store openings, but more refits, and investment behind fresh sandwich varieties and other food-on-the-go items. Existing bakery and food-on-the-go outlets will be combined into one format while plans to roll out a chain of coffee shops have been scrapped.
The news came as Greggs reported another set of dismal results. Like-for-like sales fell 3 per cent, resulting in a 29 per cent slump in operating profit to £11.5m. The successful bake at home business with Iceland drove headline revenue growth, yet management has ditched plans to expand the division. Chief executive Roger Whiteside explained he didn't want the wholesale business to cannibalise store sales. "We don't want Greggs products in freezers available in every supermarket because then people won't eat those products on the go".
In the first five weeks of the second half same store sales have fallen a further 3.2 per cent, prompting management to downgrade full-year profit guidance by £3m. Canaccord Genuity expect full-year pre-tax profits to fall to £40.8m, giving EPS of 30.9p (2012: £51.9m and 39.3p).
| GREGGS (GRG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 401p | MARKET VALUE: | £406m | |
| TOUCH: | 400-401p | 12-MONTH HIGH: | 525p | LOW: 395p |
| DIVIDEND YIELD: | 4.9% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 222p | NET CASH: | £12m | |
| Half-year to 29 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 350 | 16.0 | 12.1 | 6.00 |
| 2013 | 362 | 11.4 | 8.6 | 6.00 |
| % change | +3 | -29 | -29 | - |
Ex-div: 4 Sep Payment: 4 Oct | ||||
