A fusty British baker, best known for its sausage rolls, has achieved what supermarket giants can only dream of: almost three decades of uninterrupted growth in sales, a jump in annual earnings and a 30 percent increase in dividends for this year.
Since joining three years ago, CEO Roger Whiteside has been transforming Greggs from a traditional baker into a convenient stop for so-called food on-the-go.
The former pub executive has introduced healthy options, like spicy soups and chicken salads, which now account for 10 percent of sales. He has also extended the breakfast menu to include free-range egg omelettes alongside the traditional bacon roll. Even the hipster's favorite coffee -- the flat white -- has come to Greggs.
The changes are paying off. Net income rose 53 percent in 2015 (that gain is flattered by an exceptional charge in 2014 linked to store closures; without it, earnings still jumped 30 percent). And after sales growth slowed in the three months to January 2, trading in the new financial year has bounced back with sales at stores open at least a year jumping 4.2 percent in the first two months of 2016.
The stock rose as much as 15 percent on Tuesday, and is up 32 percent over the past year, outperforming both the FTSE All Share index and the FTSE All Share food and drug retailers index.
With Tuesday's jump, the shares trade on 20 times the next 12 months' estimated earnings. That is a significant premium to the European food retailers, which trade on about 15 times, according to Bloomberg Intelligence.
Greggs's performance certainly justifies a premium. It is doing a good job in a market that is expanding as Britons consume ever more food outside of the home. That is good for outfits such as Greggs, as well as the casual dining sector -- but a problem for traditional supermarkets.
According to analysts at Shore Capital, the food-to-go market is growing at between four and five percent a year -- and most of that is volume growth given that there's little inflation in food prices.
But competition is stepping up. Costa, the coffee chain owned by Whitbread, is expanding beyond its traditional coffee focus with freshly-baked cakes and breads in its new Costa Fresco format. JD Wetherspoon, the pub chain, said last year that it was seeking to triple sales of coffee and breakfasts over the next 18 months. There is a danger the market becomes too crowded to be lucrative.
Greggs itself is planning to expand its estate from just under 1,700 outlets to more than 2,000 over the next five years.
It is aware of the risks, and is keeping a tight control of costs. Its operating margin widened to 8.7 percent in 2015 from 7.2 percent the year before, helped by reductions in expenses. Cost control will become increasingly important to defend that margin in future.
It is Greggs's traditional focus on value -- for all the new fancy menus you can still get a bacon sandwich and a cup of coffee for two pounds -- that should protect it from the worst over-indulgence in the food-to-go market.
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