A trading update from Greggs (GRG) detailing the first 18 weeks of FY2016 reported that the high-street baker delivered total sales growth of 5.7 per cent, of which like-for-like revenues increased by 3.7 per cent. That performance looks robust against what has been a challenging backdrop for many consumer-focused favourites with exposure the UK high street, where tough conditions - including lower footfall and unexpected weather patterns - have hurt stalwarts such as Next (NXT) and Restaurant Group (RTN) since the start of the year. Greggs has prospered due to its understanding of what it is appreciated for while also expanding its range to win new customers. With growth becoming increasingly scarce in the consumer sector, we think the shares deserve their premium rating.
- Strong first-quarter update
- Outperforming consumer-focused rivals
- Store estate more efficient
- New product lines
- Bakery closures
- National living wage
Some of the most important adjustments at Greggs over recent years have emerged from the ongoing estate management programme. Stores across the estate have been refreshed, relocated and modernised. Greggs refurbished 55 stores in the first 18 weeks of 2016 and is opening more new stores than it is closing (122 opened versus 74 closed in 2015). Its estate now numbers more than 1,700 outlets. This year it expects to open 100-120 shops, and to close 50-60.