1st Aug 2023 11:20
(Alliance News) - Greggs PLC on Tuesday posted stronger first-half earnings, though the results lacked that missing ingredient to send its shares rising.
Greggs was down 7.6% at 2,552.00 pence, among the worst FTSE 250 performers.
The baker said total sales in the six months to July 1 rose 22% to GBP844.0 million from GBP694.5 million a year earlier. Pretax profit was 43% higher at GBP80.0 million from GBP55.8 million. Its bottom line got a GBP16.3 million boost from the settlement of a Covid-19 business interruption insurance claim.
Like-for-like sales in company-managed shops improved 16% on-year. Like-for-like growth moderated as 2023 has progressed, initially surging 19% in the first nine weeks of the year, and 17% in the first 19 weeks. Greggs said the Omicron-hit start of 2022 "flattered" like-for-like comparisons at the start of this year.
Greggs declared a 16.0p per share interim dividend, up 6.7% from 15.0p.
It has also continued to progress with its plans to up sales in the evening.
"This remains a significant opportunity for Greggs as it is the largest segment of the food-to-go market by value, yet the one where Greggs currently has the lowest level of penetration. In the first half of 2023, post-4pm sales grew more strongly than any other daypart, and represented 8.3% of company-managed shop sales, up from 6.5% in the first half of 2022. The extension of trading hours supported evening growth and we also saw increased levels of trade post-4pm in existing opening hours as customers recognise the convenience and value of our offer later in the day," the company added.
Greggs said its "strong trading momentum" in the first half has continued in the second. It said the rate of cost inflation "has started to ease and we expect this trend to continue through the second half".
Though the numbers were positive and the outlook promising, the shares took a bit of a beating.
RBC Brewin Dolphin analyst John Moore noted the company reported stronger sales, but the reported needed "something for investors to get excited about", however.
"While in previous years there has been something to get excited about – such as its vegan sausage roll – now it's a case of building further on the businesses foundations with new store openings, extended opening times, and greater use of digital sales channels. The big question will be how Greggs uses its cash position to pick up opportunities in the changing high street and retail environment, updates on which investors will be looking out for in future statements," Moore said.
Greggs said it expects annual results in line with expectations so it was a lack of earnings upgrades which may have also "left investors unhappy", AJ Bell analyst Laith Khalaf explained.
Looking ahead to the rest of the year, comparatives only get trickier, and Hargreaves Lansdown analyst Matt Britzman believes sales growth will slow.
"Expect sales growth to ease from here out, as Greggs starts to lose the benefit of more favourable comparable periods, so the second half is where we'll really see just how much progress is being made," the analyst added.
By Eric Cunha, Alliance News news editor
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