Companies: GRG   

Sandwiched by wet weather and increasing costs, baker Greggs has lowered its operating profit expectations for the full year by some £3m.

Reporting on the 16 weeks to 4 October, the company admitted that growth had slowed in the latter weeks. Finance director Richard Hutton blamed an extended period of rain across the country for keeping customers off the high street, along with rising raw material and energy costs.

Although the group did not see an overall collapse in customers for the period, according to Hutton, it did notice a trend towards its more value-for-money products. ‘In the current circumstances, I would rather be in our position, where we are known for selling affordable products, than be in a position where we are selling premium-priced products,’ he explained.

House broker Brewin Dolphin has downgraded its December 2008 pre-tax profit forecast by £3.5m to £46m and its 2009 estimate by £3m to £48.5m, producing earnings of 313p and 333.5p for this year and next.

Despite the tougher trading environment, Greggs still intends to push forward with plans to roll out 40 new stores over the next year. However, having opened 53 new shops in the year to date and closed 22, it has decided to spend £4m less of its original £40m investment plan.

While Greggs trades on less than ten times earnings and therefore now offers a decent yield, given the tougher trading climate on the high street, the shares are best avoided in the short-term.

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Greggs	LSE	£327.36m	3148.00p	-27.00p
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