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Greggs (LSE: GRG) shares rose 5.6% in the FTSE 250 Index Today (July 30) and with good reason. The high street baker has just reported that sales in the first six months of the year were almost £1 billion.
At just over £31, the share price isn't far off an all-time high reached in December 2021. But how much would you have now if you had invested £10k in the stock at the start of the year? Let's find out.
Greggs is not yet at its best
Firstly, the results that sent the stock higher today were very impressive. For the 26 weeks to 29 June, sales totalled £960.6m, up 13.8% on the first half of 2023. Underlying pre-tax profit rose 16.3% to £74.1m.
Comparable sales at company-managed stores increased by 7.4%, well above the industry average.
Meanwhile, it opened 51 net new stores in the period, bringing the total to 2,524 (of which 524 are franchises). It is on track to open between 140 and 160 net new stores in 2024.
Sales were boosted by strong demand for pizzas and frozen summer drinks. And it has just launched a four-portion sharing pizza box, which is bad news for my waistline as a new Greggs is popping up 10 minutes from my house.
The icing on the cake for shareholders was a massive 18.8% increase in the interim dividend, from 16p to 19p per share. Maybe I'll treat myself to a pizza when I get there in October!
Broaden customer appeal
The company aims to “significantly more” more than 3,000 stores over time. In fact, it is expanding its capacity to support up to 3,500 stores.
But where would they end up? I mean, it seems like there's at least one Greggs on every high street now.
Well, the company noted that “Greggs remains underrepresented (in) commercial parks, railway
stations, airports, roadsides and supermarkets. We have continued to increase our alliances… with supermarket groups; opening 25 stores with franchise partners, five with Tesco and three with Sainsbury's“.
This strategy is the right one because the footfall on the high streets is declining (largely due to e-commerce).
One aspect worth highlighting is the rise of healthier eating in the UK. This risk could be exacerbated by weight loss drugs containing GLP-1, such as Wegswhich may reduce cravings for fatty foods in some patients. This could affect the number of people who flock to Greggs on a whim.
That said, the company now offers much more than just sausage rolls. It sells various types of coffee, salads, fruit pots, pastas and rice bowls. There are more and more options to suit all tastes.
In line with this, Greggs remains the UK's leading takeaway food retailer, according to YouGov Brand index.
Still, a price-to-earnings (P/E) ratio above 22 suggests the stock is fully valued. For now, I'm happy to continue holding it.
That £10,000 investment?
The Greggs share price started the year at 2,602p. As I write this, it is now trading at 3,102p.
This represents a gain of 19.2%, more than double the FTSE 250's 9.1% gain so far this year. This means a £10,000 investment would now be worth £11,920 on paper.
In addition, he would have received a dividend of 46p per share in May along with a special dividend of 40p. That would have added another £330, bringing the total yield to £12,250.
