US Edition Greggs
464.7p -10.3
Questor says HOLD
The UK’s largest bakery chain said on Wednesday that sales in the third quarter rose 2.1pc, boosted by the sale of bacon rolls, which is now the best-selling sandwich line.
The company plans to increase its breakfast range to croissants and porridge to try to grow its morning business.
On a like-for-like basis, sales increased by just 0.2pc – representing a slowdown. In the 39 weeks to October sales grew at 0.5pc.
The group has added 32 stores this year as it increases its expansion away from its traditional city centre market to airports, railway stations and industrial areas. The group plans to open up to 60 stores in the full year and another 70 next year.
The shares have been hit by concerns over wheat prices, but it has raised prices on some items and the company has already bought enough flour to last to the end of the year.
Trading on a December 2010 multiple of 13, falling to 12.1 next, the valuation does not look too overstretched, although concerns about wheat could continue to be a drag.
The shares were first recommended at 400p on August 12 last year and are up 16pc compared with a market up 22pc.
The company is very cash generative, has a good growth strategy and its new product lines are selling well. But the shares are now a hold until sales growth stops slowing.