Deutsche Bank has not been convinced to warm up its 'sell' rating on British baker Greggs PLC (LSE:GRG), with analysts now trimming expectations for third-quarter trading.
Irregular weather is among the reasons for caution over the grab-and-go food retailer, as the German bank reckon milder than usual conditions aren't conducive to hot pastry sales, and will likely have weighed on demand.
DB analyst Richard Stuber pointed back to management comments at the July interims, when Greggs’ CFO noted a “high inverse correlation” between like-for-like sales and warmer temperatures.
With May and June already soft, and July through September averaging 1.2°C warmer year-on-year, Deutsche expects that pattern to have persisted. July, in particular, was relatively warm, and management disclosed at the time that sales growth was “only marginally positive.”
In terms of the shares, DB reckons the risk-reward looks unappealing.
With a 'Sell' rating and a price target of 1,330p, versus a current price of around 1,537p, the bank sees the price going notably lower.