From the off the high street food joint has been (sausage) rolling lower. Opening at £14.08, the stock found itself at £9.41 by July 24th, with a huge drop in the middle of that period thanks to an update in early May. Greggs now sits at a current trading price of £9.54, marking a huge 32% decline since the start of the year.
What was so disastrous, then, about May 9th’s statement? For the first 18 weeks to May 5th total sales rose by 4.7%, against the 7.4% increase seen for the period the same year previous. Company-managed shop like-for-likes, meanwhile, jumped 1.3%, less than half the 3.5% posted in 2017 and a sharp drop-off from the 3.2% increase announced for the first 8 weeks of the year back at the end of February.
The blame was laid at the feet of ‘weak customer footfall in retail locations’, a trend exacerbated by the Beast from the East, alongside strong comparatives. All this led to the real disappointing part of the update – and the thing that dragged the stock down by 15% in a single session – as Greggs stated that it now expects underlying profits ‘to be at a similar level to last year’. That would hold profits at £81.8 million, a decent whack lower than the £87 million previously forecast by analysts.
In terms of Tuesday’s half year results, investors are going to be on the lookout for any improvement to that guidance, as well as a pick-up in sales for the period since May’s costly trading statement, especially any potential boot from the recent heatwave.
Greggs (LON:GRG) has a consensus rating of ‘Hold’ alongside an average target price of £11.94.
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