Company of the week: Greggs

High-street bakers Greggs faces serious challenges, says Phil Oakley.

Greggs (LSE: GRG)has had a tough year, with profits falling sharply. Last week, it said that Christmas sales were 3.1% higher than a year ago, which boosted its shares. That said, the business still faces serious long-term challenges.

Greggs has found itself caught in the high-street bloodbath caused by shoppers buying more stuff over the internet. This has meant fewer visitors to its shops, a trend the company is trying to reverse.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

It's moving away from its bakery roots and turning itself into what it calls a "food-on-the-go" retailer. This is seeingit close shops on high streets and open new ones in places such as service stations and garage forecourts.

This looks like a sensible move, but the market for takeaway food remains fiercely competitive, with lots of places beckoning the lunchtime pound.

Advertisement
Advertisement - Article continues below

All these changes cost money and will stop profits growing for a couple of years. Greggs will probably be a better business once it has finished the job, but with the shares on 15 times forward earnings, a lot of the benefits look priced in.

Verdict: stay clear

Advertisement

Recommended

Visit/investments/stocks-and-shares/share-tips/600641/share-tips-of-the-week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
17 Jan 2020
Visit/519913/share-tips-8-stocks-for-robust-returns
Share tips

Share tips: eight stocks that should deliver robust returns

Ryan Ermey of US publication Kiplinger’s Personal Finance chooses his favourite stocks for the next decade, which should be able to grow for years.
28 Dec 2019
Visit/519724/share-tips-of-the-week-166
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
20 Dec 2019
Visit/519436/share-tips-of-the-week-165
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
13 Dec 2019

Most Popular

Visit/investments/stocks-and-shares/share-tips/600636/class-acts-going-cheap-buy-into-europes-best
Share tips

Class acts going cheap: buy into Europe’s best bargains

Value investing appears to be making a comeback, while shares on this side of the Atlantic are more appealing on metrics such as price/earnings ratios…
16 Jan 2020
Visit/currencies/600665/currency-corner-new-zealand-dollar-kiwi-vs-us-dollar
Currencies

Currency Corner: how is the New Zealand dollar doing against its US counterpart?

The New Zealand dollar has been doing well against the US dollar in recent months, but has started to wobble a little. Is it still a buy? Dominic Fris…
20 Jan 2020
Visit/investments/stocks-and-shares/share-tips/600641/share-tips-of-the-week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
17 Jan 2020
Visit/investments/property/house-prices/600638/uk-house-prices-may-be-heading-for-a-boris-bounce
House prices

UK house prices may be heading for a Boris bounce

The latest survey of estate agents and surveyors from the Royal Institution of Chartered Surveyors is "unambiguously positive" – suggesting house pric…
16 Jan 2020