Greggs isn't convincing City analysts.as British weather stayed warmer than usual

Deutsche Bank maintained its 'Sell' rating on British baker Greggs PLC, trimming third-quarter expectations due to warmer-than-usual weather negatively impacting hot pastry demand. Analysts highlighted management's previous comments on a "high inverse correlation" between sales and warmer temperatures, with July through September averaging 1.2°C warmer year-on-year, leading to an unappealing risk-reward and a price target of 1,330p against a current 1,537p.

Analysis

Deutsche Bank has reiterated its 'Sell' rating on Greggs PLC (GRG), trimming third-quarter expectations due to the adverse impact of unseasonably warm weather on demand. The bank's caution is substantiated by Greggs' own management, which previously acknowledged a 'high inverse correlation' between like-for-like sales and rising temperatures. With the period from July to September averaging 1.2°C warmer year-on-year and July sales growth described as 'only marginally positive,' the anticipated weakness in hot pastry sales appears to be materializing. Consequently, Deutsche Bank views the stock's risk-reward profile as unappealing, setting a price target of 1,330p, which implies notable downside from the current trading price of approximately 1,537p.

Key Decisions for Investors

• Investors holding long positions in Greggs should consider the heightened risk of a third-quarter earnings miss, as abnormally warm weather is cited as directly suppressing sales growth, reinforcing Deutsche Bank's 'Sell' rating and 1,330p price target.
• The report provides a well-defined short thesis based on the inverse correlation between temperature and sales, suggesting bearish investors could view the current price of 1,537p as an overvaluation ahead of potentially weak Q3 results.
• Traders should closely watch for Greggs' next trading statement, as any commentary confirming the soft demand trend could validate the bearish outlook, while a surprise resilience in sales would likely challenge the current negative sentiment.