Broker snap: Execution risk rises at Greggs, says Canaccord

6th Aug 2013 09:31

The share price of Greggs fell heavily on Tuesday morning after the bakery chain reported lower-than-forecast results, something which now raises the execution risk at the company, according to Canaccord Genuity.The broker maintained its 'sell' rating for the stock and cut its target price from 380p to 330p.Analyst Wayne Brown said that while Greggs' total sales were up 3.4% in the first half, a combination of falling like-for-like sales (-2.9%) and operating margins saw profit before tax (PBT) drop 28.8% to £11.4m.He said he expects to see consensus PBT estimates fall by 9-10% following Tuesday's results.The company also announced a number of initiatives with regards to its strategy review, including: an increase in the rate of refurbishments; a new bakery concept being merged with the 'food-on-the-go' idea; and an increase in investment in the supply chain. Brown said: "We expect some of this investment is to support the complexities of a food-on-the-go concept as opposed to a traditional baker but we question the depth and breadth of management skill set to manage a very different retail operation. "We question whether costs behind training and investment in management is required to drive fundamental change."He added: "There is a significant amount of work to be done and execution risk is high."The stock was down 7.4% at 408.9p by 09:58.BC