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Greggs: A Tougher Time Coming

Jun. 12, 2020 1:18 PM ETGreggs plc (GGGSF), GGGSY
Retirement Pot profile picture
Retirement Pot


  • U.K. bakery and takeout brand Greggs has a unique proposition and a compelling long-term story.
  • But its shares already reflect its strengths and this will be a challenging year for it.
  • Unknowns around lockdown exist, the future of working and Brexit will limit momentum on the stock in the coming twelve months.

Greggs (OTCPK:GGGSF) is a British bakery chain whose business and shares have had a good run in recent years. I think that it is a good business and can provide a solid investment at the right price point. I continue to maintain confidence in the business and the current management, but I think the lockdown and economic downturn have thrown up a number of obstacles which make the share less attractive than usual on a short- to mid-term basis.

Greggs: A National Bakery cum Hot Takeaway

I haven't seen a direct corollary for Greggs in most countries so it's helpful to understand what its customer proposition is. Essentially it's a bakery and indeed it formerly styled itself as "Greggs the bakers". It does provide traditional bakery items such as bread and cakes. However, a large part of its business is its role as a takeaway food supplier, both hot bakery items and sandwiches. Some shops also offer the option to eat in, at a relatively small price premium. It also offers hot drinks in the same vein - competitively priced at around a pound or so, and just another twenty pence to sit in, with a store environment that is warm and bustling although lacks the sophistication of, for example, Starbucks (SBUX).

A lot of competitors would be small, local operators, so Greggs with over 2,000 outlets occupies a unique niche as a national (albeit unevenly so) hot food takeaway chain combining taste with competitive pricing. In that sense, its competitive set includes food operators such as McDonald's (MCD) as much as it would include traditional bakers.

Greggs Knows How to Run a Business

Greggs has a skilled management team able even to get strong growth from a mature business, as this slide shows. They have introduced innovative products to maximize their

This article was written by

Retirement Pot profile picture
I am a private investor based in the United Kingdom and most interested in equities in the U.K., U.S., Canada and Norway.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Challenging trading environment in 2020 and start of 2021 will mean drip of disappointing news, limiting upside for the shares at today's prices

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