LONDON (ShareCast) - (Sharecast News) - FTSE 250 baker Greggs said on Tuesday that sales and underlying profits for 2019 will be "materially higher" than it had expected, helped by strong demand for its vegan sausage rolls.
In a trading update for the first 19 weeks of the year, the group said total sales were up 15.1% versus 4.7% growth in 2018, while company-managed shop like-for-like sales were 11.1% higher compared to 1% growth in 2018.

Shore Capital analyst Darren Shirley said the growth represents an acceleration from the already strong start to the year, suggesting LFL trading over the past 12 weeks of around 12%, which he said was "stunning".

Greggs said that sales since its strong finish in 2018 have continued to grow very strongly, helped by the rollout of its vegan-friendly sausage rolls to all shops. In addition, sales at breakfast, including Fairtrade coffee and other hot drinks, are continuing to grow strongly, as is the company's post-4pm pizza deal, which offers a pizza slice and a drink for £2.

The "exceptional" level of LFL sales growth that began in January has been sustained in the months that have followed, driven by increased visits to stores, Greggs said.

"Looking forward, the sales comparatives from 2018 become progressively stronger but we now anticipate materially higher sales for the 2019 year as a whole than we had previously been expecting.

"Whilst there have been some increases in input costs, we expect overall cost inflation to be broadly in line with our plans for the year. In the balance of the year we plan to increase investment in strategic initiatives that will deliver further long-term growth.

"Taking all this into account, the board believes that underlying profits (before exceptional costs) for the year will be materially higher than its previous expectation."

At 0900 BST, the shares were up 10.5% at 1,977.23p.

Russ Mould, investment director at AJ Bell, said: "Greggs is on a (vegan sausage) roll. Since the company launched its vegan-friendly snack in January 2019 it has upgraded guidance several times, unveiled a special dividend and added around £700m to its market value.

"Not a bad contribution for a humble bit of pastry filled with a meat substitute. This is not the only reason like-for-like sales have been shooting the lights out at Greggs; investment in the range and quality of products it sells in recent years has turned it from a humble budget baker to a food-on-the-go destination for busy consumers.

"The company is also doing a lot of the right things in the background, allocating capital to its manufacturing capabilities, improving its distribution infrastructure and getting a handle on back-office functions.

"There is a danger that expectations are being raised too high by the current period of impressive growth, however there is nothing the company can do about that, all it can do is keep plugging away.

"The success of the vegan sausage roll suggests there could be mileage in bringing out more meat-free options, though rivals will be eyeing Greggs' sales here greedily and the company is unlikely to enjoy a monopoly in this area."

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