Broker snap: Greggs offering lacks spice

6th Oct 2010 13:08

FinnCap's full year revenue forecasts for sausage rolls and pies seller Greggs are looking a little flaky after a cautious third quarter update from the bakery chain.The broker had been expecting Greggs to achieve 0.5% like for like (LFL) sales growth in the second half of 2010 but with Greggs' third quarter LFL sales growth trundling along at 0.2% and management suggesting that there will be little or no organic sales growth in the fourth quarter, FinnCap expects to trim its full year sales forecast of £668.9m.The broker is already below market consensus with its profit before tax forecast of £49.5m (market consensus is £60.9m) so will probably leave its forecast untouched, especially as Greggs seems confident it will be able to meet market expectations this year, largely through cost cutting. "Management has moved to reduce hours worked in the bakeries and the stores in response to lower volumes" FinnCap analyst David Stoddart noted. "With forecasts unlikely to change much, if at all, in response to this morning's announcement, there seems no reason to change recommendation," said Stoddart. FinnCap's recommendation is to hold the shares and enjoy the "decent, if unexceptional yield, augmented by a share buy-back programme."