The Greggs (LSE: GRG) share price is almost half the value it was this time last year. Not surprising, given the impact of Covid-19 and lockdown. Looking at the company however, I see signs of strength and resilience. These are things we can benefit from when this pandemic ends.
Latest earnings
If you look at the headlines from Gregg’s latest results, most focus on its need to reduce staff hours. Greggs has been using the government furlough scheme to keep staff employed, and when the scheme ends it simply won’t need as many shops open or people working as many hours.
According to CEO Roger Whiteside, about half of its stores have people contracted to work more hours than is needed. The Greggs share price fell about 7% on the news. Interestingly though, if you look at the other numbers in the release, I think things were pretty positive.
Greggs reported that trading this month has been about 76% of the level it was this time last year. Across its stores, sales averaged about 71% of 2019 levels. In ordinary times this news would be terrible – but these are not ordinary times.
To show such resilience in its numbers during a year of Covid-19 and lockdowns, I think speaks volumes. I see this strength coming from two things – the strong brand and the location of its stores.
Wall St vs. Maine St.
While offices across the country have been going empty, all those businesses that rely on worker traffic have suffered. While the Costas and Starbucks of the City have been empty, however, the Greggs of the high street are still seeing customers.
This preference for local high street and shopping complex locales has allowed Greggs to keep money coming in. Even when lockdown ended, most office workers are still working from home. Many of those, it seems, want a sausage roll for lunch.
This is a simplistic analysis but the location of Greggs stores has been perfect for lockdown. The company also intends to keep taking advantage of changing customer patterns. Whiteside said Greggs will be focusing on opening stores in retail parks and roadside locations, because “it is the car borne shopper that is most active out of the home”.
When will the Greggs share price go back up?
All these factors are encouraging, but I don’t discount the uncertainty of Covid-19. The Greggs share price may be low enough for a bargain, but there is still potential for it to go lower yet.
Any further lockdowns will likely hit its sales even on the high street. Problems with infections could hurt its supply chain – has they already have in Newcastle and Leeds.
Meanwhile though I think its sales numbers are holding up well, they are still down. Between May and August, the company had negative cash flow, and though this is set to change in September, it may happen again.
That said, I believe the company can weather this storm. For me, its resilience in these times is evidence of its strength in better days. Personally it is just a matter of keeping an eye on the Greggs share price and being ready to pick it up on any more dips.
