Guest essay by Eric Worrall
Who need horoscopes when you have climate models?
Greggs threatened by climate change
JUL 6, 2018, 3:19 AM
LONDON – Climate change could be hurting sales growth at Greggs, the gigantic baked goods chain, according to an analysis of Meteorological Office data by Barclays.
Broadly, Greggs is unstoppable. It has nearly 1,900 locations in the UK, dwarfing chains like McDonald’s, Starbucks and Pret a Manger. It is not uncommon to see multiple branches of Greggs on a single street, or two stores facing each across an intersection, such is Britain’s insatiable need for pies. The sausage-rolls-and-sandwiches company opens new locations in Britain at a rate of more than 10 per month. Its revenues are still growing: like-for-like sales were up 1.3% in May.
In May, Greggs issued a profit warning because sales were reduced by the “Beast from the East,” an unusually severe winter snowstorm that brought Britain to a halt for a few days. A large number of Greggs outlets were unable to open, and those that did saw lower foot traffic. The stock dropped 15% on the news.
So Barclays decided to find out just how much of a problem the weather is for Greggs. “Writing about the weather and its potential impact is never a proud moment for us, as we do not believe it affects the fundamental value of a company. However, we are regularly asked about recent warm weather, and share prices clearly react to this news,” Taylor told clients.
He discovered that Greggs has warned of the effect of weather on its business on three previous occasions, which coincided with the three greatest temperature anomalies since 2003.
Its understandable that weather so nasty that shops can’t open correlates with lack of pie consumption, but warm weather shouldn’t be such a factor. There are plenty of pie shops which do well in the warm subtropics of Australia, in temperatures Britain only experiences for a few weeks every year.
The key as far as I can tell is quality – pies sold by successful subtropical pastry vendors generally taste so nice people are tempted to eat them, even when they are not shivering through a long cold commute home and desperate for some warm food. Not having multiple shops from the same chain within a few paces of each other probably also helps.
Concluding climate is to blame for Greggs’ problems in my opinion embraces some lazy assumptions. A better question might be why the moat of desirability for “unstoppable” Greggs pies seems so narrow.
via Watts Up With That?
July 6, 2018 at 07:05PM