Investors don’t seem to be overly enthusiastic about Greggs plc’s (LON:GRG) (LSE:GRG.L) 2016 results, with the company’s share price down 2.5% at the time of writing.
However, it registered total sales growth of 7%, with company-managed shop like-for-like sales rising 4.2%. Its operating profit excluding property profits and exceptional items was 8.6% higher at £78.1 million. Pre-tax profit excluding exceptional items was £80.3 million against £73 million in 2015.
In my view, Greggs’ investment case has been enhanced by its growing strength in the food-on-the-go market. It has also made improvements to its product range, including more choice in hot drinks and hot food. Further, its ‘Balanced Choice’ healthier options could resonate well with customers in my opinion.
Greggs is making significant investments in its estate, with 92% of its total estate now transformed into the food-on-the-go format. It is also investing in upgraded operating systems, while a £100 million 5-year investment programme in manufacturing and distribution operations has commenced.
In the last 6 months, investors in Greggs have experienced a 5% fall in its share price. This compares to better investment performance from other consumer stocks such as Tesco PLC (LON:TSCO) (LSE:TSCO.L), J Sainsbury plc (LON:SBRY) (LSE:SBRY.L), Unilever plc (LON:ULVR) (LSE:ULVR.L) and WM Morrison Supermarkets PLC (LON:MRW) (LSE:MRW.L). Unilever’s shares are 7% higher, Sainsbury’s has gained 10%, Morrisons is 21% up and shares in Tesco have returned 15%.
In my view, Greggs has a good strategy. I think it will perform relatively well due to its refurbishment and investment. I also believe it will perform well even in a difficult UK economy, with its value offering likely to prove popular among increasingly cash-strapped consumers.
However, I would rather own the likes of Tesco, Morrisons and Unilever, while Sainsbury’s also may have more long-term investment appeal on valuation grounds. Therefore, Greggs is probably a stock for my investment watchlist, rather than one I’d be looking to buy at the moment.