There’s “More Than Meats The Pie” In Greggs plc’s Results

greggs_shopShares in Greggs (LSE: GRG) ought to have a safety warning on them: “people with heart conditions may not wish to take part in this ride”.  Because if you take a look at its performance over the last 12 months, there’s more peaks and troughs than you’ll find in a roller-coaster. greggs

April 2013 saw a slump following like-for-like sales declining by more than 4% over the previous 12 months, with management blaming adverse weather and lower footfall. But the share price picked up as investors followed chairman Derek Netherton’s lead by purchasing more shares when the price was depressed.

Then, the bakery chain issued another profit warning in August, once more blaming the weather (this time, accusing the summer heatwave of damaging trade), sending the shares down further. Gradually, though, the shares rebounded as Greggs’ new strategy took hold and management revealed that its summer like-for-like sales had fallen less harshly than first expected.

And — until today — since the start of the year, the shares had risen a majestic 20% in just two months as the company reported like-for-like sales in the Christmas/New Year period increased by 3.1% against 2012′s fall of -2.9%.

Which brings us up to date and, as hinted at earlier, the shares took another tumble of around 8% in early trade following full-year like-for-like sales decreasing by 0.8%, “reflecting the tough and competitive trading conditions” according to chief executive Roger Whiteside. This led to pre-tax profit before exceptional items falling by 18.9% to $41.3m, and diluted earnings per share before exceptionals down 20.1% to 30.6p.

It’s important to realise, though, that the aforementioned strategy change is still taking place — these things don’t happen overnight — and Greggs is continuing to implement its plan of becoming predominantly a ‘bakery food-on-the-go operation’ and less of a ‘bakery take-home business’. Indeed, there were signs of encouragement in today’s update as total sales were up 3.8% to £762.4m, while the dividend was maintained at 19.5p, which means that, at 3.7%, the company still yields higher than the FTSE average of 3.5%.

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> Sam does not own shares in Greggs.