Despite ongoing challenges from the UK consumer, we continue to believe that Greggs’ medium-term multi-pronged growth strategy has considerable merit, with new stores, wholesaling and franchises offering long-term growth potential, underpinned by continued investment in manufacturing infrastructure.
Today's statement is slightly disappointing, given the lack of a sales recovery in the core business. However, new channels are contributing strongly and this, together with cost control, should help to moderate the effect on profits, which nevertheless could be down for the year as a whole.
Greggs has an excellent track record, a strong balance sheet and dividend yield of four per cent. However, trading on a price to earnings ratio of 11.6 for year to 2013 and with sales and profits under continued pressure, the rating is not cheap enough to warrant a “buy” recommendation.