Greggs shares cool off ahead of results amid fear of supply chain or inflation surprises

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Sausage rolls and chocolate are on the City menu on Tuesday, along with sofas and solar power, and UK data on the services sector and car sales.


Biggest company news in the diary is probably Greggs PLC, with the Geordie baker’s shares having risen to an all-time high last month, despite the worries about working from home trends affecting its town centre-focused business.


While the FTSE 250 group is tipped to serve up a steaming set of results, close to pre-pandemic levels, the shares have dropped 8% heading into the results with analysts remaining a tad cautious given the potential for a negative surprise around supply chains and the impact of inflation.


“If Gregg’s half-year results are anything to go by, then next week’s results are likely to see sales within touching distance of 2019’s pre-pandemic level,” said Hargreaves Lansdown analyst Nicholas Hyett.


The big unknown at the third quarter is cost inflation, the analysts reckons, with food input inflation creeping up three months ago, but headlines everywhere about labour shortages and supply chain disruption only likely to be further upping the cost pressure.


New store openings and home delivery may provide some distractions too, with the company also expected to talk about new products as it looks to emulate the success of its vegan sausage rolls and attract more health-conscious customers.


Hotel Chocolat to delight investors’ palate


What better to follow a vegan sausage roll than a selection from Hotel Chocolat Group PLC (AIM:HOTC), which is offering up a set of final results for the year ended 27 June that were delayed after auditors BDO asked for more time.


The chocolatier stressed this was due to a delay in the routine practices rather than concerns about the actual results.


After its year end, back in July, the AIM-listed group raised GBP40mln to fund capital investment designed to increase long-term sales capacity and capitalise on anticipated future growth towards a GBP500mln target by 2026.


Hotel Choc revealed earlier month that it has seen a shift in its sales channel mix, with digital, subscription-continuity and partners increasing from 33% of sales in the pre-pandemic year to 52% in the final 10 weeks of its latest year, following the re-opening of physical retail across England.


With a 61% increase in the company’s customer database to 3.3mln in the past 18 months and a pivot to digital sales channels in the USA, the company said its new sales mix is resulting in “higher customer lifetime values and reflects faster growth potential”, meaning it would exceed its existing production capacity within the next three to four years if such growth continued.


Reaching the GBP500mln sales target implies a 25% compound annual growth rate, meaning the current financial year would need to deliver around GBP205mln of total sales, with house broker Liberum expecting a gross margin of 61.7% and underlying earnings (EBITDA) of GBP39mln.


Significant results expected on Tuesday 5 October:


Finals: Bluefield Solar Income Fund (LSE:BSIF), Hotel Chocolat Group PLC (AIM:HOTC) (AIM:HOTC), SCS Group plc


Interims: Inspiration Healthcare Group PLC (AIM:IHC)


Trading announcements: Greggs PLC (LSE:GRG)


Economic data: UK/US services PMI, UK/US composite PMI, UK new car sales, US balance of trade

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