City analyst: Greggs in weak position

19 October, 2012

A City analyst has claimed Greggs is in a “weak position” because of rising commodity costs and its value proposition.

Pointing to the group’s year-to-date like-for-like sales of -2.6%, Wayne Brown, analyst at Canaccord Genuity, said he was “increasingly concerned that the need for change is growing faster than what the company can deliver”.

With some 1,614 stores, Greggs is exposed to the downturn affecting the UK high street and has worked hard in recent months to target other areas of business – such as transport hubs and wholesaling.

However, Brown said those Greggs stores that are still high street-based and have not had been refurbished are under-performing in comparison to others in the eating-out market.

In a note on the retail bakery chain, Brown said: “The group has the balance sheet to significantly increase the rate of refurbishments in both its food-on-the-go and bakery concepts and open new sites off the high street.

“The structural shifts away from the high street are clearly evident across the leisure and retail sectors and it is likely that a more aggressive shop closure rate is required to help mitigate the declining returns profile.”

Earlier this week, Greggs’ chief executive Ken McMeikan joined the heads of a number of grocery and food retailing businesses to sign a letter, written by the British Retail Consortium (BRC), to the Financial Times, complaining about high business rates.

The letter said: “As the sector which pays the largest share of business rates (28% of the total), another steep successive rise would deal a blow to retailers’ ability to invest in stores and create jobs, especially in these tough trading conditions. That would mean more empty shops on high streets and fewer employment opportunities, especially for young people.”





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