Greggs IMS

The leading bakery retailer in the UK, with almost 1,700 retail shops throughout the country.  I have a holding in my income portfolio (epic code: GRG).

Greggs announced a very positive IMS yesterday with a few cautionary comments.  Total sales in the 17 weeks to 26 April 2014 was up 4.0% and own shop like-for-like sales in the first 17 weeks up 3.7%.  Although as they point out that the last year comparatives were weak, it does show a good uplift from last quarter's 2.6% like-for-like growth.   

 

Management state that input cost inflation has been lower than they have experienced in recent years and so there has been some benefit to margin in the period.  They add that the business remains highly cash-generative and maintains a strong balance sheet position, so I would expect a rising net cash position at the interim stage and the possibility of a return to increasing dividends.  My forecast for the year as a whole is still for the business to be cash neutral see here for my original estimate.

 

For the period being reported 66 shop refurbishments were completed (200 targeted for the year), they opened 20 new shops and closed 28. Also a number of freehold properties were disposed of in the period for a profit of £1.4m.

 

The cautionary part of the announcement states that they expect the second half to be more challenging, as they come up against relatively stronger sales comparables and likely cost inflation. Although overall management expect to deliver satisfactory financial results for the year.

 

I'm pleased with progress at Greggs, but I wonder if the share price at 551p has got a little ahead of itself.