Greggs on a roll says Berenberg, but keeps at 'hold'

With Greggs continuing its "very strong performance" in recent weeks, generating a "very impressive" 9.6% increase in like-for-like sales in the first seven weeks of 2019 on the back of a significant marketing boost provided to it following the highly successful launch of its vegan sausage roll, Berenberg's earnings estimates for the firm had increased more than 10%.

"Although the recent period was against particularly soft comparatives, we were surprised that on a two-year basis like-for-like growth remained at almost as strong a rate as the weeks that followed the launch of the vegan sausage roll.

"This suggests Greggs is continuing to benefit from greater brand awareness and as a result, we now assume two-year like-for-like growth remains at a similar level until the end of Q3, leading to a full-year forecast of an 8% rise in like-for-like revenue."

On top of that, the German investment bank noted: "There is still a possibility that our forecasts rise moderately during the remainder of 2019."

However, Berenberg believed Gregg's current share price already fully reflected both the potential for further earnings momentum and the special dividend that it expected would be announced at the time of the group's first-half results.

The German broker, which reiterated its 'hold' rating on the bakery's shares, also highlighted that much of Greggs' supernormal like-for-like growth was driven by sausage rolls and other savouries that are not as popular during warmer months, stating "it may be challenging" to maintain this momentum throughout the entire summer.