Jefferies: Greggs’ pricing edge slightly narrows versus rivals

Following Greggs’ (LSE:GRG) recent profit warning, Jefferies released an updated analysis showing a slight weakening in the bakery chain’s pricing position compared to some competitors. According to their latest Sandwich Price Tracker, Greggs’ sandwich prices have risen by 6% over the past year. This growth aligns closely with Sainsbury’s (LSE:SBRY) 5% increase and Boots’ 7.5%, while outpacing Tesco (LSE:TSCO) and Pret, both of which maintained stable prices, and M&S (LSE:MKS), which saw a modest 1% rise.

Looking at a two-year span, Greggs’ prices climbed 10%, similar to Boots’ 12% and Sainsbury’s 9%, yet still higher than Tesco’s 5%, M&S’s 3%, and Pret’s 1%. Jefferies notes these figures reflect Greggs’ own reported price hikes: 4-5% early in the year followed by a further 1-2% increase in May.

Despite this slight softening in pricing advantage, Greggs remains notably more affordable than key competitors like Boots, M&S, and Pret. Jefferies suggests the recent profit warning mainly reflects short-term weather disruptions rather than a fundamental shift in the brand’s appeal. In fact, Greggs’ like-for-like sales for March through May exceeded expectations with roughly 4% growth.

The research house views the current market dip as a buying opportunity. They emphasize Greggs’ strong value proposition, solid brand loyalty, steady market share gains, healthy margins, and promising store expansion plans with projected cash returns above 30%. Additionally, Greggs’ current market valuation hovers near a decade-long low, potentially enhancing its investment appeal.

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