The future for Greggs after first loss and profit warning

Bakery chain makes first loss since 1984 listing, but when will it recover?

We've expressed concern for the FTSE 100 due to a logical expectation of many companies issuing profit warnings due to the disaster which was 2020.

Greggs (LSE:GRG) the bakers stepped into the spotlight yesterday, announcing record losses. Indeed, their first loss since listing in 1984, and of course, their share price increased by 8% on a day when the FTSE was defying gravity!

The company’s expectation of a return to profit in 2022 doesn't resonate well, especially thanks to growing fears it shall be autumn 2021 before the UK returns to whatever the ‘new normal’ will be.

Of course, our towns and cities are now mostly deserted canyons due to people working from home and 'enjoying' online shopping. All this ensures they are nowhere near a convenient Greggs outlet.

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The company statement says "history shows city centres as the driving force of any economy and so they will come back even if it is at a lower level".

For me this rings hollow, as no-one knows what a life after Covid-19 shall really be like.

For now, we're going to adhere to our suspicion of future severe market reversal. 

As for Greggs’ share price, trading around 1,920p at time of writing, it needs to move above 2,052p to give assurance movement on the current cycle should prove viable.

Exceeding such a level looks capable of triggering recovery toward an initial 2,248p with secondary, if exceeded, calculating at 2,567p.

The secondary ambition is visually interesting, suggesting a future attempt to match the series of historical highs attained in the last few years. We will have strong reason to anticipate hesitation should such a lofty ambition occur.

For everything to go pasty-shaped, the price needs to fall below 1,700p, this risking a pretty messy chain of events which should bottom around 943p.

Source: Trends and Targets. Past performance is not a guide to future performance

Alistair Strang has led high-profile and "top secret" software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know "how it worked" with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.

Alistair Strang is a freelance contributor and not a direct employee of interactive investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang or interactive investor will be responsible for any losses that may be incurred as a result of following a trading idea.