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Convenience food special - give me Greencore's sandwiches over Dominos' pizza!

By Chris Bailey | Tuesday 30 January 2018


Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


I was a bit worried the other day to read that the humble sandwich might be one of the biggest contributors to global warming...but as I had walked to the supermarket to buy my latest sliced bread offering I felt sufficiently virtuous to keep on eating. I cannot believe that too many of Greencore's (GNC) customers at multiple supermarkets and convenience stores are too fussed either judging by the tone of today's trading update.

At the end of November I confessed my love of the humble sandwich as an investment theme versus the then oh-so-trendy blockchain - and it will not surprise you to know that I am sticking with this view given the general positive tone of the trading statement ('2018 has started well...continuation of the themes discussed in November'). From the link above you will recall the basic thesis is that Greencore has been a worthy supplier of sandwich and other convenience food offerings in the UK market for a while now but has recently undertaken a deal which has built up its US position with the aim of doing something similar over there. The market remains sceptical given the previous challenges faced by European companies over the other side of the Pond but my view is that the Greencore management are battle hardened and ultimately winners.

To this end, I liked the chat around pricing power where they countered underlying inflationary pressures via price increases, the chat about 'excellent progress' in reorganising the UK operation to make it more dynamic (they dumped earlier in the week the small desserts operation on the basis it was not hitting their capital return targets - good discipline) and the desire to keep on making necessary changes in the US to allow them to hit their targets. It was also good to hear about the strong cash flow generation: Greencore is on track to get the net debt to ebitda ratio down to x2 by the end of this year. In combination this should placate some concerns. I am still a buyer here and am hopeful of 250p by the end of the year.

Meanwhile...I still remain partial to a slice or three of pizza as a tasty treat but a few months ago I was a bit unimpressed by the romp in Domino's Pizzas' (DOM) shares away from a level I had written down as being of interest (250p). Well from a share buying perspective, the pizza slices have gone cold as the share has continued rallying after today's update which included a little uptick to profit hopes. Kudos to them: the strategy including a new high in store openings still seems to be working both here and overseas. But for me I am going to ape the words I wrote a few months ago:

'Yes, chat on the call about continued hopes for 5% like-for-like growth is in the retail space catnip-esque but you are paying up for it...and the brainwashing adverts might not always work'

To make bread in the convenience food space here give me the sandwich over the pizza option.


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