There aren’t too many FTSE 250 firms I’d call iconic. Aston Martin, Dr Martens and Warhammer maker Games Workshop spring to mind. But Greggs (LSE: GRG) is certainly also in that category, in my opinion.
Last summer, I remember seeing a group of young lads going to a festival. They were all decked out in Greggs basketball vests (part of the Primark X Greggs range).
Another time I saw someone wearing a white Greggs hoodie with the words ‘It’s a Pasty Thing’ written down the sleeve. Brilliant!
Last Christmas, the bakery chain even opened a Bistro Greggs, where the Festive Bake was served a-la-carte “with duck-fat roasties, smoked pancetta, chestnuts and sprouts, with a pouring of silky gravy“.
Clearly, the cult brand doesn’t take itself too seriously. But behind the self-deprecating humour, this is a serious business, as long-term shareholders will attest to.
The stock’s delivered a 20.5% annualised total return (share price and dividends) over the past decade!
While it’ll be difficult to match that over the next 10 years, I still think the shares will do well. Here’s why.
Strong start to 2024
On 14 May, the company released a positive trading update. It reported a 7.4% rise in like-for-like sales at company-managed shops for the first 19 weeks of the year.
Total sales rose to £693m from £609m a year earlier. The firm said transaction volume growth was driven by increases in delivery sales, more evening trade and rising use of the Greggs App.
Meanwhile, 27 net new shops were opened, bringing the total to 2,500. It’s confident in achieving 140-160 net openings in 2024.
One negative, though, is ongoing cost inflation. It is expecting a 4%-5% rise in costs over the year.
Still, management said its outlook for 2024 remains unchanged. Analysts are expecting £2bn in revenue (around 11% growth) and net profit to increase about 8% to £137m.
So growth goes marching on at Greggs. And there’s also a small but growing dividend.
Menu innovation
Now, one risk I see here is a long-term shift towards healthier eating. This could be even more pronounced if weight-loss drugs like Wegovy take hold in a big way.
These medicines can suppress appetite, potentially causing customers to cut back on the sort of high-calorie indulgences Greggs is famous for. This is worth monitoring.
That said, I think the company is ahead of the curve here. It has been expanding its healthier food ranges, including a vegetarian pesto and mozzarella pasta dish to accompany its vegan sweet potato bhaji and rice salad bowl.
High-quality
The firm’s aiming for 3,000 shops over time. To support this, it’s developing two new production sites in the Midlands. Both are expected to be operational by early 2027.
Meanwhile, there’s now a Greggs at London Gatwick Airport, as well as 24-hour drive-through locations. I can get food delivered on both Uber Eats and Just Eat, while it has opened four shops with Tesco this year.
All in all, the company’s serving up exactly what shareholders like myself want to see.
The shares aren’t cheap at 20 times earnings, but this is a high-quality business with loyal customers and smart management. If I didn’t already own the stock, I’d buy it in June.
The post 1 iconic FTSE 250 stock I’d snap up for my ISA in June appeared first on The Motley Fool UK.
5 Shares for the Future of Energy
Investors who don’t own energy shares need to see this now.
Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.
While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.
Open this new report — 5 Shares for the Future of Energy — and discover:
Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
How to potentially get paid by the weather
Electric Vehicles’ secret backdoor opportunity
One dead simple stock for the new nuclear boom
Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!
Grab your FREE Energy recommendation now
More reading
Here’s how much I’d need to invest in Greggs shares for £100 in monthly passive income
1 high-growth FTSE 250 stock that I’d buy and hold for years
Ben McPoland has positions in Games Workshop Group Plc and Greggs Plc. The Motley Fool UK has recommended Games Workshop Group Plc, Greggs Plc, Just Eat Takeaway.com, Tesco Plc, and Uber Technologies. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
