Shares in the high-street baker Greggs (LSE: GRG) rose by over 4% in early trade this morning, following strong half-time results. But can the company continue its progress with its current strategic plan?
Let’s look at today’s figures. Total sales increased by 3.1% to £373m against £362m in the first half of 2013, while own shop like-for-like sales saw a rise of 3.2%, arresting a 2.9% decline seen at the halfway mark last year. Significantly, pre-tax profit (excluding exceptional items) saw a 48% uplift to £16.9m (2013: £11.4m).
One possible cause of concern, though, is saturation. With 1,661 shops trading across the country as at the end of June, the period saw 36 stores closed as opposed to 26 new shops opening. However, part of Greggs’ strategy is to improve and introduce a ‘great shopping experience’, and 131 shop refurbishments in the first half is a positive sign of this.
Elsewhere in the business, Greggs seems to be scoring highly on the ‘value for money’ front, as it extends its meal deals to include a wider variety of options, as well as increasingly health-conscious customers, launching new ‘Balanced Choice’ products with fewer than 400 calories. It also aims to capture a share of the ‘coffee commuter’ market, introducing a new improved coffee blend which has seen strong sales growth.
Finally, the dividend. Management maintained the dividend at 6p per share, which still represents a 3.9% yield. Compare this to the FTSE 100 average of 3.42%, and I’d argue that Greggs makes a strong case for inclusion in your portfolio as an income share.
