Greggs has been having a difficult year of its so far, with a profit warning in May. The snack seller, best known for its sausage rolls – which The Armchair Trader can’t stand, to be honest – issued a trading alert in Q2 that cited weak consumer footfall in its prime retail sites and the Beast from the East, the wintry storm that beset the UK back in March.
This all contrasted with a strong period of trading in early 2017. Greggs results are due out tomorrow and some traders are feeling very negative about the company. Chief executive Roger Whiteside has forecast that underlying Greggs profits would come in broadly flat for 2018 against the £81.8 million recorded at the pre-tax level in 2017. That estimate had not changed when Greggs interim results were issued in July of this year.
Greggs results due out tomorrow
The Greggs results due out tomorrow will show total sales growth, like-for-like sales growth and the net number of shop openings and closures. The last set of Greggs results showed that it had opened 59 sites and shut 25 as part of a plan to add 100 shops on a net basis this year.
The market did not take kindly to the last set of full Greggs results back in May: Greggs shares fell of a cliff, from £12.67 to £10. Since then Greggs shares have had a moribund summer, and in late July you could have picked up Greggs stock for as little as £9.42. Since then there has been somewhat of a cautious rally, on the back of what traders saw as slightly more positive figures in July. At the time of writing, Greggs shares were back at over £10 but still a long way off their 52 week high of £14.
Greggs shares still too expensive?
High street retailers are still stocks that most investors will shy away from and there seems little enthusiasm to take on the risk associated with event cheap retailers like Greggs. While we like discount supermarkets and feel they have an important role to play in the UK economy, Greggs is really going to have to pull something remarkable out of its hat to achieve the valuations it was trading at a year ago.
If you are already holding Greggs shares, there are not enough bad vibes out there to warrant dumping them, but this stock does not look like a buy to us, given the uncertainty clouding retail sector in the UK at the moment. Greggs shares are trading at a PE ratio of around the 17x mark, which is looking a little expensive for us, given that it needs to get out of its 1980s business model and do something a little more imaginative.