United Kingdom-headquartered Greggs Plc is a bakery on-to-go retailer. The company offers bakery goods, sandwiches and drinks in its shop. The group provide sales to retail customers, as well as to several organizations. The group has around 1,969 stores including 1,700 own managed stores and 269 franchised stores. MFS International (UK) Ltd., Standard Life Investments Ltd. and Massachusetts Financial Services Co. are the major shareholders in the on-to-go retailer. (Source: Thomson Reuters).

Key Statistics


Trading Updates – Q1 FY19
Greggs Plc reported its trading report for the first quarter on May 14, 2019. In the first 19 weeks of 2019, the group’s total sales jumped by 15.1 per cent against 4.7 per cent in the corresponding period of the last year. The On-to-Go retailer’s own managed stores sales on a like-for-like basis surged by 11.1 per cent against the growth of 1.0 per cent during the same period of 2018. Increased footfalls have driven the sales in traditional as well as in the newly launched products. During the reported period, the baker grocer opened 38 new stores and closed around 22 stores.

Financial Performance – FY18 (£ mn)
On a year-on-year basis, the group's reported sales were up by 7.2 per cent to £1,029.3 mn against the sales of £960.0 mn in FY17. Greggs own managed stores sales on a like-for-like basis surged by 2.9 per cent against the growth of 3.7 per cent in FY17. Underlying operating profit (excluding property profits and exceptional items) was £89.1 mn and reported a growth of 9.1 per cent against the year -ago performance and pre-tax profit, including exceptional items, jumped by 14.8 per cent to £82.6 mn.
Total dividend for FY18 increased by 10.5 per cent to 35.7 pence against 32.3 pence reported in the last financial year.

However, trading during the reported period was substantially impacted by the weather conditions, post a good start to 2018, the dire wintry conditions in early March dented sales miserably. Elongated heatwaves during the June and July considerably impacted 2018 sales, with strong demand for cold drinks, but lacklustre demand for the bakery items.

Stock Performance – 1 Year
 
Daily Price Chart (as on May 15, 2019), before the market close. (Source: Thomson Reuters)

At the time of writing (as on May 15, 2019, at 12:08 PM GMT), shares of GRG were quoting at GBX 2,104 and added 44 points or 2.14 per cent against the previous day closing price. Stock’s 52 weeks high and low is GBX 2,118/GBX 939. During the past one-year, the stock has delivered a price return of 101 per cent, and on a year-to-date basis, the stock was up by 63 per cent respectively. From the volume standpoint, its 5-days daily average volume traded on the London Stock Exchange was 23 per cent above the 30-days daily average volume.

Conclusion
Despite the decent performance of the group in early 2019, there are many crucial uncertainties in the months ahead. Ongoing uncertainties around the Brexit deal is the crucial one, as potential disorderly exit could impact the supply chains, currency exchange rates, tariffs and shoppers demand. The economic conditions are going to be challenging in the rest of 2019; however, inflationary pressure has reduced, but confidence levels will continue to remain low over uncertainties regarding the economic conditions. Weather condition is also a critical factor for the group, and dire wintry conditions and elongated heatwaves strongly impacted last year sales. Based on the above rationale, we recommend investors to keep a cautious “Watch” approach on the stock at the current market price of GBX 2,104 (as on May 15, 2019, at 12:08 PM GMT), while any correction with support from few catalysts needs to be evaluated at a later stage.

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