Key insights
- The analyst views Greggs as an interesting QSR stock, noting strong sector growth in Q1. While European stocks appear cheaper than US counterparts, the analyst believes Greggs' modest growth is priced in, contrasting with higher earnings pressure on US chains. A bear case exists regarding cannibalization, but Greggs' management plans expansion to 3000 stores with a new distribution center. The analyst questions the availability of Greggs locations in London.
i look at food stocks for some time now, mainly because they are businesses which are not that difficult to understand, so its easy to keep up with an entire sector and learn more about it along the way.
Q1 was rather strong for the sector in terms of growth, compared to 2025, having growth at 8%, 200bp above the previous quarter.
euro stocks always look cheap compared to the US, but in my opinion modest growth is priced into Greggs, while US stocks have much more pressure on earnings, especially some newer chains. What i think is most charming about the company is the opportunity to invest in a new sausage roll distribution center, instead of a data center.
the bear case is found in a 2025 piece in the Financial Times. Greggs cant grow that much anymore, and new stores are cannabilizing. Management howerver disagrees, and i guess we will see who is right. When the new distribution center is online, management says this will allow them to grow to 3000 stores (2759 now).
I've never been to one. Is the sausage roll good? What about the Pizza? A contact of mine was in the UK lately, roaming around in London. I told them to go eat at a Greggs, but they couldn't find one.