MIDAS SHARE TIPS UPDATE: Time to taste a profit from Greggs

In January 2019, yellow vest protests spread across France, same-sex marriage became legal in Austria and Jair Bolsonaro became the president of Brazil. Closer to home, Greggs launched its vegan sausage roll. 

The new snack was an instant sensation, contributing to a stellar year for the fast-food chain, with sales up 13.5 per cent and a special £35million dividend for shareholders. 

Then came Covid-19. All 2,000 Greggs stores were closed from March to June last year, after which successive lockdowns, social distancing rules and people working from home created further setbacks. 

Good news: The company is back in store opening mode, with 34 new shops opened so far this year and at least another 65 scheduled for the next seven to eight months

Greggs soldiered on but sales fell 30 per cent in the year to January 2, 2021, the company declared a pre-tax loss of £13.7million and dividends were suspended. 

Last week, however, chief executive Roger Whiteside had some more cheerful news for investors. Customers have been flocking back since shopping restrictions were eased last month, sales have rebounded and Whiteside now hopes profits will recover to 2019 levels this year. 

The company is back in store opening mode, with 34 new shops opened so far this year and at least another 65 scheduled for the next seven to eight months. 

In the past, areas such as Central London were too expensive for Greggs. Now rents have tumbled and the group is about to open in Canary Wharf, with further outlets coming soon in other high-end locations. 

Last year, Greggs stuck to the old favourites, such as steak bakes, sausage rolls (conventional and vegan) and doughnuts. Now the menu is almost back to pre-Covid days and new ideas are on trial, including new vegan options such as ham and cheese baguettes and sausage baps. 

Deliveries were a feature of 2020 and have remained popular even as people are allowed to go out more. 

Whiteside is determined to build Greggs’ share of this market, particularly in the evening, with hot products such as potato wedges and chicken sandwiches. Whiteside, 63, is expected to retire in the next couple of years but there is a long-term plan to take the number of Greggs stores to 3,000 by 2030, assessing along the way whether the nation is ready for even more Greggs. In the nearer term, the business is keen to resume dividend payments and will look closely at whether it can afford them when the interim figures are released this August.

Traded on: Main market Ticker: GRG Contact: corporate.greggs.co.uk or 0191 281 7721 

Midas verdict: Midas recommended Greggs in 2009, when the shares were the equivalent of £3.65. By August 2019, the price had risen to £22.50 and it seemed as if there was still value to be had in the stock. 

Today, the shares are £24.98 after a strong run in recent months. If the economy continues to soar ahead, the stock should show further growth. But long-term investors could hedge their bets, sell some shares and bank a bit of profit. Greggs has made a strong recovery but the shares have kept pace with events and even Whiteside admits that the outlook is uncertain. 

This post first appeared on Dailymail.co.uk