This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.
Bakery chain, Greggs, saw its share price fall 1.75% despite cheery festive sales figures which resulted in a profit upgrade.
Last year was a stellar year for the Newcastle-founded chain – in the fourth quarter of 2019, like-for-like sales grew by 8.7%, with demand intensified by new vegan products and successful marketing campaigns. Gregg’s share price still stands at 2436p at the time of writing and its expecting ‘slightly higher’ underlying profit before tax for 2019 according to Chief Executive Roger Whiteside.
So, what has caused the slight share price slump, and can Greggs continue on its current roll in 2020? Increasing costs look like they might pile on the pressure in the forthcoming year – an increase in the National Living Wage and rising pork prices could all affect the bakery’s bottom line. But analysts are optimistic about the chain’s potential to maintain its momentum – share prices have risen by around 30% since November and Greggs has announced it will dish out a £7 million thank you bonus to its 22,000 employees. One analyst from Brewin Dolphin has described the bakery as “on the cusp of the FTSE 100 which is remarkable considering where they come from and what they do” and others have been similarly optimistic with Quilter Cheviot describing Greggs as offering “attractive growth opportunities in an accelerating market” and Shore Capital maintaining its higher-than-consensus forecasts.
Desultory festive sales have seen Marks & Spencer shares fall by nine per cent despite the retailer’s rally at the end of last year. The high street stalwart saw its food fly off the shelves over the festive period, but other departments, especially menswear and gifts, did not fare so well. The retailer’s share price stands at 198.90p at the time of writing, as while its outlook for the year remains unchanged, its margins are now expected to be ‘around the lower end of guidance.’
Food was the still the star performer for the retailer with a 1.4 per cent revenue growth in this department, and a new tie-in planned with Ocado from September. Womenswear is also said to have performed well, according to Chief Executive Steve Rowe, but a poor online performance and a drop in international sales has added to the store’s woes, which fell out of the FTSE 100 for the first-time last Autumn. So, can Rowe continue with his transformation plan and see in better days for the one-time fashion favourite? Opinions are divided on this one – some analysts have found positives in the latest trading update, but many remain unconvinced. Analysts at Retail Economics have suggested that the latest figures ‘signal the green shoots of recovery’ but highlighted concerns about the lack of growth in the retailer’s online business. Analysts at AJ Bell and Markets.com also pointed out that the slow online growth demonstrates how far M & S has fallen behind its competitors. Whether or not the retailer can fight back in 2020 remains to be seen, but the general consensus is that it needs to act fast to regain its footing.
British Airways owner IAG has had a shaky take-off in 2020, with a share price dip, and now the retirement of its Chief Executive Willie Walsh. The news comes on the back of an already turbulent 2019, and now the group’s shares stand at 634.60p at the time of writing. With fresh leadership on the way, in the shape of Iberia Chief Executive Luis Gallego, is this a good entry point for the shares or is it still too big a risk? Political uncertainty, a £183 million fine following customer data theft and ongoing pilot’s strikes caused IAG’s shares to plummet by 38 per cent in the first half of last year. But they rallied, rising by nearly 52 percent again by December. Unfortunately, a surge in oil prices after the assassination of Iran’s military leader and poor customer feedback in the Which? annual airline poll mean that this year hasn’t got off to the best start for the airline group. Analysts remain cautious about IAG’s prospects – the general consensus is that Gallego will need to focus on building up the reputation of core brands like BA, and restoring relations with its pilots, before share prices will soar.
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance.