The Greggs share price is higher this morning, despite reporting a first annual loss in 36 years.
Greggs posted loss of £13.7m, with a 30.5% fall in full-year sales to £811.3m, as the Covid-19 lockdowns played havoc with the business. In company-managed stores, like-for-like sales slumped by 36.2%. Greggs swung from a profit last year of £108.3m to a loss of £13.7m, which includes government support for job retention and business rates relief.
Lockdown closures hit the Greggs share price
Greggs is known for its sausage rolls and baked goods, but in recent years it's made efforts to broaden its menu, including the famous vegan sausage rolls. This paid off, as the Greggs share price hit a record high in January 2020. However, the spread of Covid-19 and subsequent lockdowns clobbered the Greggs share price, as it lost over half its value by September.
Despite the hit, business is improving, and there has been a progressive recovery in sales through the second half of the year. Sales in 2021 have been better than expected. Greggs is cash positive at the end of the financial year, and in addition to that it can tap into £100m in a revolving credit facility. It seems the group can ride out the next few difficult months, and will be in a good position when restrictions are eased.
Delivery partnership pays off
At the start of 2020, the group announced that it would be partnering with Just Eat for its food delivery business. In light of the lockdowns, it proved to be a very lucrative deal as delivery capabilities are a huge advantage in the current climate. In the first 10 weeks of trading in the new year, delivery accounted for 9.6% of total sales at company-managed outlets.
Greggs began to reopen stores last summer, and even though trading is challenging, the fact it's still motoring along puts it in a good position for when restrictions are eased. Greggs fared better than most eatery groups because a relatively small number of its outlets have city centre locations. The shops are typically in suburbs, which are gaining far more footfall in the current environment.
Reopenings to boost Greggs' share price
Britain’s vaccination distribution scheme is one of the best in the world. Schools have reopened, and should everything go according to plan, the country will be operating without restrictions by late-June. Recently, traders have been rotating out of stocks that outperformed amid the restrictions, like Ocado, and snapping up stocks like Greggs as they stand to benefit from a less restrictive environment.
The Greggs share price has been in a strong uptrend since early November. If the bullish run continues, it should retest the 2,539p area. A move lower might find support at 2,000p, a break below that metric could see it target 1,852p, the 100-day moving average.
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