Greggs (LSE: GRG) shares flew 5.6% higher in the FTSE 250 today (30 July) and with good reason. The high street baker just reported that sales in the first six months of the year were nearly £1bn!
At just over £31, the share price is not far off an all-time high set back in December 2021. But how much would I have now if I’d invested 10 grand in the stock at the turn of the year? Let’s find out.
Not peak Greggs yet
Firstly, the results that sent the stock flying today were very impressive. For the 26 weeks to 29 June, sales totalled £960.6m, a 13.8% increase on H1 2023. Underlying pre-tax profit rose by 16.3% to £74.1m.
Like-for-like sales at company-managed shops were up 7.4%, well ahead of the industry average.
Meanwhile, it opened 51 net new shops in the period, taking the total to 2,524 (of which 524 are franchised). It’s on track to open 140-160 net new shops in 2024.
Sales were boosted by strong demand for pizzas and iced summer drinks. And it just launched a four-slice sharing pizza box, which is bad news for my waistline with a new Greggs popping up 10 minutes from my house.
The icing on the cake for shareholders was a massive 18.8% rise in the interim dividend, from 16p to 19p per share. I might treat myself to a pizza box deal when that arrives in October!
Broadening customer appeal
The company is aiming for “significantly more” than 3,000 shops over time. Indeed, it’s building out capacity to support up to 3,500 shops.
But where would these go? I mean, every high street already seems to have at least one Greggs.
Well, the company noted that “Greggs continues to be underrepresented [in] retail parks, railway
stations, airports, roadsides and supermarkets. We have continued to grow our partnerships…with supermarket groups; opening 25 shops with franchise partners, five with Tesco and three with Sainsbury’s“.
This strategy is the right one because footfall is declining on the high street (largely due to e-commerce).
One thing worth highlighting is a rise in healthier eating in the UK. This risk could be exacerbated by GLP-1 weight-loss drugs like Wegovy, which can reduce cravings for fatty foods in some patients. This might impact the number of people popping into Greggs on a whim.
That said, the company is about more than just sausage rolls these days. It sells various coffees, salads, fruit pots, pasta, and rice bowls. There’s increasingly something for everyone.
In line with that, Greggs continues to be the UK’s leading food-to-go retailer, according to the YouGov Brand Index.
Still, a premium price-to-earnings (P/E) ratio above 22 does suggest the stock is fully valued. I’m happy to keep holding for now.
That £10k investment?
The Greggs share price opened the year at 2,602p. As I write, it now trades for 3,102p.
This represents a gain of 19.2%, more than double the FTSE 250’s 9.1% year-to-date return. It means a £10,000 investment would now be worth £11,920 on paper.
Further, I’d have received a dividend of 46p per share in May along with a 40p special dividend. That would have added another £330, bringing the total return to £12,250.
