Greggs’ shares slump on LFL decline

07 August, 2013

Greggs' CEO Roger Whiteside

Shares in Greggs, the country’s largest bakery retailer, fell by 7% yesterday after the company revealed its like-for-like sales (LFLs) were down by 2.9% in the first half of the year.

Yesterday, new chief executive Roger Whiteside unveiled a raft of plans he hopes will bring the core estate back into LFL growth, including a concentration on the £6bn food-to-go market.

The company also plans to limit the amount of new openings, abandon the building of a new frozen savouries plant and the roll-out of the Greggs Moment coffee concept, and spend £25m on new backroom “processes and systems”.

Outlining the strategy, Whiteside said Greggs was a “much-loved” brand that would benefit from the changes. However, the City appeared unimpressed with the plans.

Decision

Darren Shirley, of City analyst Shore Capital, said he applauded a decision to rein in new openings. But, rating Greggs as a hold, he warned: “While greater focus is good news, we have no evidence that it will return Greggs to positive LFL growth, deliver the potential positive operational gearing and return the group to profitable growth, with any turnaround in momentum and margin likely to be an 18- to 24-month story at the earliest, in our view.”

Wayne Brown at Cannacord Genuity said Greggs’ interim results had been “worse than expected” and added: “There is a significant amount of work to be done and the execution risk is high.”

Commenting on the £25m spend to improve its backroom processes, Brown added: “We expect some of this investment is to support the complexities of a food-on-the-go concept as opposed to a traditional baker, but we question the depth and breadth of management skill set to manage a very different retail operation.

“We question whether costs behind training and investment in management is required to drive fundamental change.”

After its update yesterday, shares in Greggs fell by over 7% to 410p by 9am. They closed the day at 402.25p





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