Greggs - Rate of recovery continues to surprise
Greggs’ Q221 trading has surprised on the upside, with positive two-year like-for-like (lfl) sales growth continuing through the end of the period, having previously reported a return to growth earlier than expected. We upgrade our revenue forecasts for FY21, assuming a positive lfl outturn for the rest of the year, versus negative previously, leading to PBT upgrades for FY21 and FY22 of 18%. The strength of the recovery also leads us to increase our dividend forecast for FY21 by more than 150%. The P/E for FY22 of 22.4x is consistent with Greggs’ average trading multiples before COVID-19, reflecting its medium-term growth outlook and shareholder returns, but below prior peak multiples.Greggs is a bakery food on-the-go retailer. Co. provides a range of fresh bakery goods, sandwiches and drinks in its shops. Co. also provides frozen bakery products to its wholesale customers. As of Dec 31 2016, Co. had 1,764 shops in operation Co. had 157 franchised shops operating in travel and other convenience locations, with a particular focus on motorway services and petrol forecourts. Co.'s Balanced Choice products provide choices from a selection of freshly prepared sandwiches, wraps, salads, yoghurts, hot soups, porridge pots and freshly baked savouries.
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