London, UK, 2 April 2024

Edison issues outlook on Greggs (GRG): Showing us how it’s done

The second full year of Greggs’ five-year growth plan to double revenue by FY26 should be marked down as very successful, especially so given the challenging external environment. Unlike many consumer-facing companies, high selling price inflation was accompanied by volume growth, leading to good market share gains. The consumer is responding well to new initiatives to grow revenue in new dayparts and digital channels. Profitability was well-managed with better recovery of input cost inflation than FY22. We look for more of the same in FY24, which will be a significant year from a capital investment perspective, and beyond.

The updated DCF-based valuation, which incorporates the roll forward and updating of our estimates and WACC (reduced from 10% to 9% to incorporate lower bond yields and equity risk premium), has increased to £30.20 (£29.70 previously). Prospective EV/sales and P/E multiples for FY24 of 1.4x and 21.9x, respectively, are at the mid/upper end of its more recent average multiples.

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