Greggs: A Strong Finish to FY23
Edison Group | Jan 11, 2024 13:00
GRG’s FY23 sales of £1,809m included stronger-than-expected trading in Q423, with like-for-like sales in company-managed stores of 9.4%. This rate of growth is impressive, given the strong comparative of 18.2% in Q422, and included the expected slowing from Q323 as the company annualised the price increases made in October 2022. Net new store openings of 145 in the year were towards the upper end of management’s expectations at the interim stage. The indicated year-end cash position of £195m is also better than our previous forecast of £173m, due to more favourable phasing of tax payments from higher capital allowances.
Management has indicated that FY23 profit is in line with its expectations. For FY24, they have provisionally guided to mid-single-digit cost inflation in FY24, which is significantly better than at the start of FY23. The cost pressures have switched from input costs, such as food and packaging, to staff costs (management has increased pay to above the National Living Wage from the start of January 2024) and c 7% increases in business rates from April. We have increased our FY23 sales to reflect the outperformance versus our expectations but have retained our profit estimate for FY23–25, which are broadly in line with the consensus medians (Source: Refinitiv).
The share price has rebounded from the more recent lows in October 2023 as some of the consumer sectors have returned to favour. The prospective P/E multiple for FY24 of 19.5x is above the long-term average (since FY13) of c 17x but below the average multiples of recent years of 20x and over.
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