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Bakery chain Greggs (GRG) jumps 8% despite first ever annual loss
Greggs (GRG) traded 8% higher in midweek after investors honed in on the company’s digital expansion and Q4 sales recovery, even though it forecast an annual loss of £15m.
Greggs (GRG) closed 8% higher on Wednesday, even though the British bakery chain said that it would post its first ever annual loss and warned that a rebound into the black might not occur until 2022.
The pandemic has hit Greggs’ operations considerably during the last nine months, with store closures and restrictions leading to a £300m decline in sales in 2020 compared to a year earlier, and 820 job losses.
However, investors were buoyed by its Q4 sales, which were 81% of the equivalent quarter in 2019 and a vast improvement on Q3, as trading conditions improved.
Chief executive Roger Whiteside said that the firm’s ability to pivot to new working practices and provide collection and takeaway food during the year “demonstrated the resilience of our business”.
The return to a national lockdown in England will be another blow for Greggs, but it still has ambitious expansion plans with 100 new outlets set to open this year and further investment in its home delivery service.
The Newcastle upon Tyne-based company said that it expects 800 locations to support home delivery in 2020.
A new dinner menu for the service will also be tested.
Hargreaves Lansdown analyst Susannah Streeter said that “flaky sales” are expected in 2021, but believes that “a net cash position of £37mln and a three-year £100mln revolving credit facility” will ensure business continuity.
Investors are not overly concerned either, as Greggs shares ended Wednesday’s session 7.87% higher on the London Stock Exchange, making it the biggest winner on the FTSE 250 Index.
It appears that investors took cues from the physical store and digital service expansion, and Q4 sales recovery, rather than the expected £15m loss for 2020.
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