Greggs PLC’s new boss has a hard act to follow
“Whilst management has set out demanding and exciting medium-term targets to FY26 (in October 2021) it will not be the incumbent CEO who has to deliver them”
Greggs PLC (LSE:GRG) is overvalued, according to Shore Capital, with the broker concerned that there is some execution risk involved in meeting ambitious targets announced today.
What is perplexing the broker is that back in October management set out demanding medium-term targets stretching forward to 2026 and yet with today’s announcement of the imminent departure of highly respected chief executive officer Roger Whiteside it will be a new chief executive officer who will be a “hostage to fortune” in terms of delivering the growth.
Whiteside will be replaced by Roisin Currie, an internal candidate who has been with the business for twelve years. She is currently Greggs’s Retail & Property Director.
Roisin Currie currently has responsibility for @GreggsOfficial retail operations across the UK and its central support team, as well as leading the development of its shop its and growing delivery business https://t.co/IdgrGIeQjk
— MCA (@MCAInsight) January 6, 2022
“From an equity valuation perspective, as much as we admire a Greggs’ sausage roll, amongst an excellent evolving assortment that is a testimony to Mr Whiteside’s leadership it should be said, we balk at the share price valuation afforded to the group’s stock,”the broker said, reiterating its “sell” recommendation.
The broker wonders whether Currie, or indeed anybody lined up to replace Whiteside, would have agreed to be held to what Shore described as “strong medium-term targets”.
“Indeed, we ask if the market has factored in any execution risk at all to that demanding plan, noting as we do the need for high single digit compound LFL [like-for-like] sales growth taking into account currently subdued conditions (it is perhaps ironic that only weeks after announcing the new strategic plan that sales momentum dipped and so our point about execution risk),” the broker said.
Shares in Greggs are down 6.3% today reflecting the group warning of more challenging conditions for consumers in the last couple of months and the fact that Whiteside will be a hard act to follow.