Russ Mould, AJ Bell
“Greggs’ ambitious growth strategy isn’t quite going to plan, with a reduction in guidance for the number of net shop openings in 2023. Previously hoping for 150 net openings, the sausage roll king now expects between 135 and 145 net new sites.
“It’s hardly disastrous, but gives investors something to grumble about. Achieving the new guidance would still be a record year for the absolute number of new shops opened, and planting new flags across the UK provides more opportunities to grow sales.
“Greggs knows it cannot rely on the sausage roll alone to lure in the punters, so a lot of work continues to go into product innovation. More hot food on the go could appeal as autumn takes its grip, while greater delivery capabilities mean people who don’t want to venture outside can still get their Greggs fix. Accessibility and convenience are the name of the game and Greggs is making improvements on both measures.
“A lack of upgrades to earnings guidance may disappoint the market, but there is a lot going on to suggest Greggs can still be a winner. Investments in production and manufacturing should help to support the expansion of the business and make the group more efficient."
Alex Smith, Third Bridge
"The rising cost of living has led consumers to opt for more affordable meals at Greggs. Greggs continues to be one of the most trusted and budget-friendly brands in the UK."
"Extending operating hours has proven successful in generating new revenue. According to our experts, Greggs' next step should involve reevaluating menu choices and offerings to make them more appealing to customers, as morning and lunchtime customers have different preferences from those dining in the evening."
"Our experts believe that there are opportunities for Greggs to introduce a value-added product range, as there is currently a significant gap between Greggs and brands like Pret and Leon."
"With increasing labor costs and the narrow profit margins in the business, Greggs is likely to explore automation solutions in both the kitchen and at the counter."
Wayne Brown, Liberum
"Greggs has continued to trade strongly in 3Q’23 with LFL sales +14.2% yoy. Store openings are progressing well with 82 net stores opened YTD against a 140 full year target. Management notes some easing of cost inflation as expected (LFL guidance for 2023 is c.+9%) and full year expectations are unchanged. Menu expansion continues to drive sales in evening dayparts, which remains a significant opportunity.
"The shares have had a relatively weaker run recently, down c.15% from the peak in May’23 (still +6% YTD and +45% LTM), but are still reasonable fully valued at 18.3x 12m forward PE multiple and 8.5x 12m forward EV/EBITDA."
Charlie Huggins, Wealth Club
"This is another solid performance from Greggs in a challenging economic environment, with little sign so far of consumers cutting back on sausage rolls and pasties.
"Greggs has continued to gain market share in a difficult environment which is mightily impressive. There is no doubt Greggs' brand is resonating strongly with the UK consumer and is in fine fettle.
"The cost of raw materials, energy and wages have risen rapidly over the last year, but encouragingly these cost pressures are now beginning to ease. This isn't just good news for profit margins but should also help underpin consumer demand by reducing the need for price increases.
"Overall, Greggs' performance so far this year is impressive. At the start of 2023 the outlook for Greggs looked extremely unsavoury. But the economy has held up better than expected and the group's execution has been excellent. With cost pressures easing, the business looks well primed for a return to profit growth in 2024."
Clive Black, Shore Capital
"Greggs has delivered yet another period of strong top-line progress with Q3 FY23 sales 20.8% ahead year-on-year (13 weeks to 30 September) and company-managed store like-for-like ('LFL') sales 14.2% higher. The group states that this performance was driven by footfall.
"Within the overall performance, Greggs' more recent lines of growth, evening and app trade, progress with the former accounting for nearly 9% of company-managed store sales whilst app participation in these stores was 13.1%.
"Greggs has opened 82 net new stores YTD comprising 144 additions and 62 closures, the latter reflecting a good discipline to us in a large estate around store quality and returns. For the year as a whole, the group guides to net openings of up to 145 units and forty relocated outlets; we are unsure if these are additions or within the c145 total. Greggs remains a business with considerable ambition to grow its business, which we like, noting confidence in this statement for the CY24 opening programme."