Broker snap: Greggs fairly valued despite 2012 disappointment, says Canaccord

20th Mar 2013 12:10

Canaccord Genuity has said that Greggs' 2012 results were 'unsurprisingly disappointing' but has retained its 'hold' rating and 485p target price for the stock.Analyst Wayne Brown said that like-for-like (LFL) sales were poor, down 2.7% on the year, while margins and profits were lower than forecasts. Nevertheless cashflows were strong.Current trading is also disappointing with LFL sales down 4.0% in the first 11 weeks of the year. However, Brown pointed to recent positive data from the British Retail Consortium which showed a rise in the number of shoppers on the High Street."The strategy for 2013 has been reshaped with investment behind the core estate rising and lower rates of new openings. We expect this to have a negative impact on LFL sales in the short term due to increased shop closure but should provide a stronger platform for growth in the future," he said.With the investment in its wholesale and franchise business, Canaccord is "positive on these developments", though anticipated short-term costs lead to a 3.0% cut to the broker's profit before tax forecast for 2013."We feel a refurbished estate should provide the group with greater pricing power, the opportunity to improve the quality, and depth and breadth of their range."Shares were down 6.02% at 492p by 12:49.BC