Broker snap: Panmure cuts forecasts for Greggs after profit warning

29th Apr 2013 09:52

Panmure Gordon has cut its estimates for High Street bakery chain Greggs following a profit warning on Monday, but has maintained its 'buy' rating for the stock.Greggs said that total sales in the 17 weeks to April 27th were up 3.0%, but like-for-like sales were down by 4.4% due to poor weather in January and March. The company now expects pre-tax profitsfor the full year to be slightly below the lower end of market expectations which it believes ranges from £47.5m to £55.2m.Panmure has now cut its pre-tax profit forecasts for the next two years by 16% and 14% to £45m and £50.5m, respectively."This statement obviously casts doubts on the company's long-term growth, given the implied sales performance at its core stores, which are suffering from the demise of the High Street. "The latter we believe is structural, not temporary and we believe that Greggs needs to move away from the High Street much faster than it currently plans."The target price for the shares has been cut from 550p to 450p. At this level, the stock would trade at 13.5 times earnings."We are maintaining our 'buy' recommendation - while we expect that the shares will fall this morning - as we believe that an evolved investment case focusing upon cash generation and higher ROCE could sustain a higher share price."The stock was down 8.3% at 424.1p by 10:17.BC