‘Peak Greggs’ Is Upon Us as Vegan Sausage Roll Buzz Fades
‘Peak Greggs’ Is Upon Us as Bakery Chain’s Growth Seen Slowing
(Bloomberg) -- Have we reached the high point for Greggs shares? Peel Hunt analysts think so, as the buzz surrounding vegan sausage rolls starts to fade.
Although sales remain strong, the rate of like-for-like growth will start to normalize in the second half, the company said Tuesday, causing the shares to lose a little of their recent strong momentum.
“Right now we are experiencing ‘peak Greggs’,” Peel Hunt analysts Jonathan Pritchard and John Stevenson wrote in a note. “Greggs’ growth this year will be stellar, but the market knows that, and with no change to forecasts today given the concerns on the outlook, it will be hard yards for the shares.”
Greggs shares fell as much as 7.3% on Tuesday, the most since May 2018. The stock has been unstoppable this year, gaining 88% through Monday as hype surrounding the introduction of a vegan sausage roll helped its market value surge above 2 billion pounds ($2.4 billion).
“It’s definitely not peak Greggs,” Roger Whiteside, Chief Executive Officer of Greggs, said on a call with journalists. “New customers are being attracted by publicity surrounding the vegan sausage roll and the fact that we’ve been transforming our shops and transforming our offer over the last five years. But we keep adding a hundred new shops, so it can’t be peak Greggs, can it?”
Peel Hunt is the lone bear on the shares, downgrading its rating to reduce earlier this month and recommending that investors take profit. Its price target of 2,000 pence suggests about 12% downside from the last price of 2,272 pence.
Analysts at Barclays also said the shares may struggle to maintain their gains in the short term. “Greggs’ valuation is elevated vs long-term averages and looks vulnerable to a de-rating,” analyst Richard Taylor wrote in a note. Still, in the long term “the fact that the company is investing rather than focusing on short-term profit is a factor that should help sustain a premium rating.”
--With assistance from Timothy Abington.
To contact the reporter on this story: Lisa Pham in London at lpham14@bloomberg.net
To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, Paul Jarvis
©2019 Bloomberg L.P.