£2116.2m market cap

2092p last close

With 2,009 shops, eight manufacturing and distribution centres and 23,000 employees, Greggs is the UK’s leading ‘food-on-the-go’ retailer. It uses vertical integration to offer differentiated products at competitive prices.

Investment summary

Greggs’ trading update for the first six weeks of Q419 highlights an improvement in sales growth. Like-for-like (l-f-l) sales growth of 8.3% follows 7.4% in Q319 and is against a tougher comparative, allaying fears about Greggs’ sales momentum. We upgrade our l-f-l sales forecast for FY19 by 70bp to 8.6% growth, which feeds through to PBT forecasts increasing by 4.6% in FY19 and 2.8% in FY20. Our DCF-based valuation increases to 2,091p.

Y/E Dec
Revenue (£m)
PBT (£m)
EPS (p)
P/E (x)
P/CF (x)
2017A 960.0 135.7 81.8 63.5 32.9 15.6
2018A 1029.3 145.7 89.8 70.3 29.8 13.8
2019E 1164.7 231.7 112.9 87.9 23.8 12.4
2020E 1244.6 244.4 119.1 94.4 22.2 11.8
Industry outlook

Greggs enjoys an expanding market. The Project Café2017UK report (Allegra World Coffee portal) valued the UK coffee shop market in 2016 at £8.9bn, +12% y-o-y, with branded outlets accounting for £3.7bn. Allegra estimates it could reach £16bn by 2025. The squeezed consumer is a potential concern, although Greggs is well placed for the value switch after widespread refurbishments and extended customer options as it moves to widen its market.

Last updated on 06/12/2019
Share price graph
Balance sheet
Forecast net cash (£m) 64.2
Forecast gearing ratio (%) N/A
Price performance
Actual 16.4 4.0 53.2
Relative* 17.6 3.3 39.9
52-week high/low 2476.0p/1257.0p
*% relative to local index
Key management
Roger Whiteside CEO
Richard Hutton FD

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