Greencore shares drop as Berenberg downgrades on consumer caution

Food-to-go maker sees drop as shoppers ‘fret over political and economic uncertainties’

Greencore has become more dependent on the UK after selling its US operation last November to Heartside Foods.

Greencore has become more dependent on the UK after selling its US operation last November to Heartside Foods.

 

Shares in Greencore, which makes about half of all sandwiches sold on UK’s high streets, slid on Friday after analysts at German brokerage Berenberg downgraded their stance on the stock as firms in the sector face pressure from large customers and rising costs.

Berenberg cut its stance on Greencore shares to “hold” from “buy” and lowered London-headquartered peer Bakkavör to outright “sell”, saying UK consumers are becoming more cautious in their spending as they fret about political and economic uncertainties.

Analysts at the brokerage, including Joseph Barron, added that UK supermarket chains were currently negotiating aggressively with their suppliers.

“With political and economic uncertainties continuing to weigh on consumer confidence, shoppers are, at present, reverting to more cautious spending patterns,” they said.

“Furthermore, raw material and labour cost inflation headwinds appear to have accelerated, putting pressure on margins.”

Greencore’s shares fell as much as 4.6 per cent on Friday in London to £1.98 before closing the day down 3.6 per cent at €2.00, while Bakkavör slumped by up to 8.8 per cent.

Greencore, led for more than a decade by chief executive Patrick Coveney, has become more dependent on the UK after selling its US operation last November to Heartside Foods, the country’s largest maker of nutrition and snack bars for major brands, in a $1.075 billion (€950 million) deal.

Berenberg estimates that Greencore’s organic revenue in the food-to-go segment of the industry will slow over the coming years, it should continue to grow at a faster pace than the wider UK food market. That’s because of the company’s key focus on the food-to-go segment of the market, which is continuing to expand.

In January, Greencore undertook a tender offer for shares in order to distribute £509 million in proceeds from the US business sale.

The company had originally planned to disburse the money by way of a special dividend but changed the plan after shareholders complained about the tax implications of the scheme.