The Greggs (LSE: GRG) share price took a beating in the stock market crash, as the high street bakery chain closed its doors for business. However, last week it rose 7% as investors looked forward to relaxing the lockdown.
The Whitbread (LSE: WTB) share price did even better, jumping almost 20% in a week. The hotel and restaurant group also has to make up lost ground when Britons are let off the leash. Is now the time to buy these two consumer stocks, ahead of the next leg of the recovery?
Greggs’ share price strikes back
Don’t expect Greggs to enjoy a full-throttle reopening. It’s been notably cautious, shelving plans to open multiple stores in the first half of last month. Management fears staff will be mobbed by sausage roll lovers, who’ll ignore social distancing rules in the clamour. Many stores drew long queues at peak times before the pandemic.
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With all 2,050 outlets closed since 24 March, Greggs is going to take a massive hit to revenues. Analysts at Jefferies predict a £58m loss this year, against a profit of £114m last year.
I’d expect strong demand when its stores do finally open, although rising unemployment could take the edge off that. Stores based near offices may take a hit if more people work at home.
Another concern is that by delaying planned store openings, the pandemic will reduce long-term profits and slow the Greggs share price recovery.
The FTSE 250 goup has the liquidity to see it through, having raised £150m for 11 months through the Bank of England’s Covid Corporate Financing Facility. If we avoid a second wave of infections, profits could be recover nicely. The Greggs share price has a long way to go, but trading 25% lower than before the crisis offers a tempting entry point.
Whitbread is on the up
When I hear the name Whitbread, I think of beer. Other investors will think of Costa Coffee, sold to Coca-Cola last year for £3.9bn. Today, its best-known brand is Premier Inn, but it also owns a string of restaurant chains, including Brewer’s Fayre and Beefeater.
You don’t need me to tell you business has been tough lately. Whitbread’s shares trade 40% lower than at the start of the year, an even bigger drop than the Greggs share price. The FTSE 100 group has secured its balance sheet with a £1bn rights issue, but losses look set to extend into 2021. It’s now reopened hotels in Germany, but anticipates low occupancy levels until September, at least.
Whitbread went into the crisis with just £323m of debt, which should stand it in good stead. But everything depends on how lockdown goes from here. I suspect Germany will make better job of escaping the pandemic than the UK, offering some respite from tough domestic conditions. However, a second wave would hurt.
As with the Greggs share price, you should only buy Whitbread if you understand all the risks, as well as the potential rewards.
