Shore’s Clive Black and Darren Shirley said: “Greggs is embarking upon a period of accelerated new space growth, augmented by potentially exciting complementary retail streams.” This would be serviced by a “demonstrably more modern and fit-for-purpose supply chain”, they added.
The analysts predicted good earnings and dividend growth for the foreseeable future and, should like-for-like (LFL) volume ever persist, “potentially significant margin upside”.
They said: “Conservatism runs through the fundamental control of the business, making for a strong balance sheet with few worries over pension responsibilities.”
While high street sales remain weak, the analysts expected Greggs to deliver satisfactory medium-term revenue growth through a step up in store openings to about 90 new stores a year. Modernised and more focused bakeries, coupled with increased capacity and productivity, would allow the baker to exploit its new retail outlets.
The new space and evolving product mix will allow Gregg’s to develop its store portfolio.
“In addition to a step up in new outlets, often in new territories with improved configuration, Greggs is also seeking to make its estate more potent through revisiting its heritage in local bakeries and exploring the growing coffee shop market through Greggs Moment,” said Black and Shirley.
The baker had also made a good entry into the wholesale and franchise markets, they added.
Shore forecast a five-year compound annual growth rate of 8.6%. This would be driven by new space, modest LFL assumptions and the cumulative effect of investment and productivity initiatives.
“More fundamentally, Greggs has a balance sheet to give investors comfort with a modest pension deficit to manage and cash on the balance sheet”, said Shirley and Black.
Greggs was “a core component of a UK mid-cap equity portfolio”, they said, repeating their ‘buy’ recommendation.
Meanwhile, Cornish and Devon bakers are incensed by fast food chain McDonald’s description of pasties as “meat pies” and its spelling of the west country delicacy as ‘pastie’ rather than ‘pasty’.
The bakers object to McDonalds’ terminology used in a guide for American tourists.
"McDonald's should know better – and they should know how to spell pasty. It's like calling a Big Mac a beef sandwich,” Phil Abbott, director of Plymouth-based Ivor Dewdney Pasties, told the Guardian newspaper.