2 August 2022
If you are covering Greggs’ half year results, please see the following comment from Mamta Valechha, equity research analyst at Quilter Cheviot:
"Greggs reported first half results today that were reassuring as the group continues to make progress despite broader economic uncertainties.
"Greggs' previous trading statement in May flagged that like for like (LFL) trading YTD was c10% above the 2019 level, today the group reported total first half sales of 12%.
"Despite higher revenues, profits remained flat (on H1’21) as the business absorbed previously flagged headwinds of business rates reintroduction, the VAT increase, and cost inflation.
"On the latter, cost inflation increased significantly in the first half, for Greggs the biggest being food, but also includes packaging and energy. The group has pushed through price increases in May, which crucially have not impacted transaction numbers.
"Recent trading has been encouraging with July slightly accelerating from the level seen in Q2 (Q2: 11% yoy vs. 13% in July), driven by transaction volumes.
"With trading in line with expectations, the group reiterated its full-year guidance.
"We continue to like Greggs, the group has strong revenue growth levers to pull from including the expansion of delivery and evening trade, which remain on track despite recovery in ‘walk-ins’. Store roll-outs are also going according to plan in underpenetrated areas such as airports, railways and supermarkets, with the group making the most of good site availability.
"But in the short-term we see Gregg’s position in the value end of the market as a good place to be in this environment, and we remain encouraged by LFL holding up well despite price increases."
