I have long been a fan of Greggs (LSE: GRG), and I don’t just mean its sausage rolls. It has a strong brand, good customer loyalty, and I think it is well managed. Unfortunately for me, the Greggs share price has always reflected this. No bargain to be had.
With coronavirus and lockdown however, an opportunity may be coming. The Greggs share price is still holding up well, but I do think there may be more pressure ahead.
My main reason for thinking the Greggs share price will see more pressure is because of a second lockdown. It now almost seems certain that the UK will have to put in place another lockdown at some point.
In the interim, Tier 3 lockdowns will be having a similar effect on non-essential businesses. Wales is undergoing a circuit breaker lockdown right now. All these places have Greggs shops that are not open and not selling. This drop in sales will filter through to results at some point.
The company has already said it will need to roughly halve its staff hours to avoiding letting people go. In July, it was forced to ask its banks for additional finance to help it weather the Covid-19 storm.
In my opinion, a second lockdown seems likely to hit the Greggs share price further. I will be waiting for it to do so, and watching for when the next lockdown ends.
The upside for the Greggs share price
The lockdown is no doubt a negative for the Greggs share price, but the company has a lot going on in the positive column too. Firstly, it has already managed to do very well all things considered.
In September, the company reported trading at about 76% of 2019 levels. Not bad given social distancing measures. While many of its more upmarket peers have been suffering from a lack of office traffic, Greggs has taken less of a hit on that front.
Greggs has a much greater high street presence than it does in office locations. Ideal of course when people are working from home. It has also made efforts to focus on retail parks and roadside locations. Again, both places likely to see greater footfall than office hubs in the foreseeable future.
One additional factor that I see as positive for the Greggs share price is its move towards online deliveries. After a trial period, Greggs has joined with Just Eat to deliver its products in certain areas.
This comes at the perfect time, when lockdown means food deliveries and takeaways increase. When lockdown finally ends, this and its strong brand will help it already be an established presence in the delivery arena.
As I said, personally I am on the look out to invest. For now though, I just feel the Greggs share price could have further to fall. Another lockdown is key for me. I am on the watch for the best bargain I can get.
The post Why I am waiting for the Greggs share price to fall even more appeared first on The Motley Fool UK.
Karl has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020