Greggs PLC (LON:GRG) shares skidded lower on Friday after the bakery chain abandoned plans to reopen 20 of its stores in Newcastle next week amid fears such a move could attract large crowds.
The FTSE 250 firm said on Thursday that large numbers of customers looking to get their hands on steak bakes and sausage rolls could affect its ability to maintain social distancing measures.
READ: Greggs, John Lewis among high street names planning to reopen stores
Instead, the company is now planning to trial new social distancing working practices for its staff behind closed doors, with walk-in customers to be invited at an unspecified date later on.
Greggs is not the only firm to begin floating potential plans to reopen in the coming months, with department store John Lewis also reported to have drawn up plans to potentially reopen some of its stores as early as mid-May.
Broker downgrades to ‘sell’
In a note on Friday, analysts at Peel Hunt downgraded Greggs to ‘sell’ from ‘reduce’ and retained their 1,500p target price, saying the company’s admission that it may not be able to cope with social distancing during lockdown was “not a good sign for when it eases and footfall rises again”.
“Under the standard “body/sq ft” rules that the retail sector is adopting to facilitate social distancing, the average Greggs store has little room for anybody but the staff. Queueing at 2m distance outside the store is going to lose its novelty very quickly for even the biggest sausage roll addict and we have racked our brains for a solution. None is forthcoming to us”, the broker said.
Analysts also said that while the company may come out of the pandemic stronger than many of its competitors, they thought current markets forecasts on a V-shaped recovery “feels very bullish”.
“It will take a long time for sales volumes to rebuild and it will also be very difficult for management to judge how to forecast sales and thus build the appropriate cost bases. They won’t solve the issue quickly and we expect calendar 2021 to be almost as tricky as 2020”, they concluded.
Shares in Greggs dropped 5.8% to 1,726.6p in mid-morning trading.