Greggs Q3 sales rise as new products prove popular

Greggs posted a rise in third-quarter like-for-like sales on Tuesday as new products proved popular with customers, and the FTSE 250 baker backed its expectations for the full year.

In the 13 weeks to 29 September, total sales were up 7.3%, while LFL sales were 3.2% higher. Still, this was a slowdown from 8.6% and 5% growth, respectively, the previous year.

The group said it traded well against strong comparatives in the quarter, which was characterised by particularly hot weather. The company's drinks range and new focaccia-style pizzas proved popular over the summer and Greggs said it continued to see growth at breakfast time, helped by more deals and its selection of Fairtrade coffees.

In the year to date it has opened 93 new stores, including 35 franchised units, mostly in transport locations. Greggs has shut 35 shops, giving a total of 1,912 shops trading at 29 September. For the year as a whole, it still expects to open 100 shops, around 60 of which are planned to be with franchise partners.

"We were pleased with our trading performance during a period that included a long spell of hot weather, which made sales patterns more difficult to predict.

"This, and the resulting mix of sales led to a lower-than-normal trading margin in the first part of the quarter, offset by improved trading as we came into September. Overall our expectations for the full year outturn remain unchanged."

Shore Capital said the trading update was "robust" and noted that historically, periods of very hot weather have been major trading headwinds for the group.

"Trading on a December 2018 price-to-earnings ratio of 16.0x, and an EV/EBITDA of 7.3x, yielding 3.3% we reiterate our hold stance," said analyst Darren Shirley.

Russ Mould, investment director at AJ Bell, said: "Sausage rolls and pasties are not typically what you hanker after on a warm sunny day so for Greggs to achieve like-for-like sales growth of 3.2% through a third quarter period which encompassed the summer heatwave is impressive.

"It also shows the company’s efforts in branching out from its budget baker beginnings to new product ranges are bearing some fruit. Strong demand for pizzas and summer drinks was a significant factor behind the robust sales performance.

"As such it is a feather in the cap for Greggs’ well-regarded management team and should help get the market back on side after May’s cold weather-related profit warning."

At 0930 BST, the shares were up 7.1% to 1,077.48p.