Greggs Plc Approaches All-Time High As Turnaround Takes Shape

High-street baker Greggs plc (LON:GRG) serves up tasty first-quarter update.

Mark Rogers

As the Head of The Motley Fool’s UK Investing Team, Mark approaches the stock market with the same old-fashioned business instincts and values that he honed growing up around the family business. An investor for 20 years, Mark specialises in unearthing top-quality under-the-radar investments in the small-cap market. He currently serves as Director of Investing for Motley Fool UK services and Managing Director of Motley Fool UK.

Published 30 April, 2014 11:43 am BST

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The shares of Greggs (LSE: GRG) rallied by 4% to 536p this morning after the bakery chain announced a significant reversal in like-for-like sales.

The food-to-go baker’s total revenues grew by 4% compared to last year, as renovated shops rejuvenated the company’s like-for-like sales. Greggs completed 66 refurbishments this quarter, as part of a turnaround strategy enacted by CEO Roger Whiteside, who took over last year.

Longer trading hours, refreshed product lines and low cost inflation all combined to boost results. But Greggs was quick to remind investors that these results were delivered in comparison to last year’s exceptionally weak trading, when heavy snow impacted high-street footfall.

While the company doesn’t expect the same kind of comparable growth next quarter, there were clear signs that Greggs’ new strategy is taking shape, and that rumours of the company’s demise last year were greatly exaggerated.

Looking ahead, the company added:

“The second half is likely to be more challenging as we come up against relatively stronger sales comparables and likely cost inflation. Overall we expect to deliver satisfactory financial results for the year and good further strategic progress.”

With a market cap of £540m, Greggs’ shares trade at 15 times expected earnings, and offer a prospective dividend yield of 3.5%.

Of course, whether that valuation, today’s statement and the future prospects for the bakery industry all combine to make shares of Greggs a ‘buy’ remains your decision.