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HSBC takes a bite out of Greggs and Restaurant Group

The global bank’s analysts cut their stance for Greggs to ‘reduce’ from ‘hold’, while maintaining a 2,000p target price

Greggs vegan pasty
The HSBC analysts also cut their stance for Restaurant Group to ‘hold’ from ‘buy’

HSBC Securities took a bite out of both Greggs PLC (LON:GRG) and Restaurant Group PLC (LON:RTN) on Wednesday after downgrading ratings for the two food concessions firms in a major travel and leisure review.

The global bank’s analysts cut their stance for Greggs to ‘reduce’ from ‘hold’, while maintaining a 2,000p target price as they believe the bakery products firm’s shares “are up with events and LFL momentum won’t stay”.

In late morning trade on Wednesday, the FTSE 250-listed firm's shares were changing hands at 2,318p each, down 0.7% on Tuesday's close.

READ: Greggs' profits "slightly" ahead after £7mln thank-you payout to staff

The analysts noted that while the Greggs has been trading in line with like-for-like sales growth, comparatives are very tough - at +12.6% - on a two-year basis.

They also pointed out: “Staff costs and higher pork prices will be a key headwinds with any potential offset from Sterling strength, coming in from Q2 onwards.”

Staff costs also to hit Restaurant Group

The HSBC analysts also cut their stance for Restaurant Group to ‘hold’ from ‘buy’ and reduced their target price for the FTSE 250-listed firm to 150p from 175p.

In late morning trade on Wednesday, shares in the Wagamama, Garfunkels and Frankie & Benny’s restaurants operator were trading at 130.60p, down 0.6% on Tuesday’s close.

The HSBC analysts said: “We moderate our view on Restaurant Group, driven by staff cost increases and the impact from temporary concessions closures.”

The  analysts noted that comparatives remain soft for leisure assets, but they “don’t see catalysts for faster Wagamama, Pubs & Concessions growth.”

Quick facts: Greggs PLC

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Market Cap: £3.05 billion

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