Market report: Shares in Greggs fall after depot closure due to Covid-19

With few signs of a stampede back to offices and other workplaces, the last thing food-on-the-go firm Greggs needs is a coronavirus outbreak on its doorstep.

Shares fell by as much as 3% today after it emerged the baker’s Leeds distribution centre has been closed for a deep clean after an undisclosed number of staff tested positive for Covid-19.

It’s another setback for the company, which last month recorded a steep fall in half-year sales and swung to a pre-tax loss of £65.2 million, from a profit of £36.7 million last year.

Shore Capital analyst Clive Black believes the factory outbreak is unlikely to have a major financial impact, as the firm has ample resources to cover any disruption. However, he remains concerned about how the pandemic continues to affect consumer behaviour and markets, particularly in travel hubs and business locations.

Black warns that 2020 will be a “financial wipe-out” year for Greggs, with the potential for this to afflict a premium stock multiple built up after years of strong trading.

Shares later rallied to stand 1.5% lower, off 24p at 1416p. This compares with a low of 1193p earlier this month and 2440p prior to the pandemic.

The wider London market was in subdued mood, mirroring the mixed reaction of US markets to the Federal Reserve’s widely expected announcement that it will take a relaxed view on inflation when devising interest rates.

Governor Jerome Powell is instead happy to see prices run above the 2% inflation target for some time if it protects the wider US economy.

The pound strengthened against the dollar in response, up over a cent at $1.3285.

The prospect of interest rates lower for longer would normally boost markets, but with the record-breaking S&P 500 barely higher overnight the FTSE 100 index rose 6.75 points to 6,006.74, ahead of Bank of England Governor Andrew Bailey’s speech at Jackson Hole.

The second-tier FTSE 250 index was 6.57 points lower to 17,755.46 , despite a 6% surge for British Gas owner Centrica.

Components and packaging specialist Essentra also gained 2p to 313.4p after it reported improving revenue and order trends across its three divisions in the second quarter to June 30.

Adjusted profits for the first six months were 48% lower at £21 million.