Shore Capital admits to underestimating Greggs

"Stunning" like-for-like growth of 9.6% in company-managed shops led the analysts to admit underestimating Greggs.

Consequently, they upgraded their below-consensus full-year 2019 CPTP forecast by approximately 10% to £102m, earnings per share of 79.0p.

Dividend per share was now seen rising by 16% to 41.6p in 2019, before climbing by a further 7% to 44.4p in 2020.

The broker's analysts commented that the boost to the baker's already strong trading followed high levels of media interest and "extensive publicity" surrounding the launch of the group’s ‘vegan friendly’ sausage roll at the start of the financial year, despite the derision directed at the pastry by one Piers Morgan.

"Customer transactions have increased and with the volume growth evident across the savoury category the strong trading has also, we believe, generated considerable operational gearing benefits across both the store base and manufacturing infrastructure," they said in a research note sent to clients.

Whilst Greggs has stated that trading "eased slightly" through February, which analysts estimate to mean a drop from approximately 11% growth in January to roughly 8% growth, trading is still on course to be ahead of market expectations, ShoreCap said.

In fact, given the weak, weather-driven like-for-like comparative of 1.5%, strong growth was expected before the comparative is expected to toughen to 4.3% in the second half of the year.

Greggs' shares were up 11.14% at 1,779.00p at 1641 GMT.