Analysts at UBS have said that they see significant store roll-out potential beyond the formal Greggs management target and that the company could operate in excess of 2,500 stores, with the group well positioned given “lower cannibalisation and competitor incidence rates than Costa”.

UBS said: “Our analysis indicates the potential for a store number in excess of 2,500 (vs. 1,768 in FY16 and Greggs target of ‘substantially more than 2,000 shops’) with Greggs well positioned given lower cannibalisation and competitor incidence rates than Costa Coffee, a competitor still delivering good growth with a store base 25% larger than Greggs, indicating an opportunity to increase density along with its strategy to diversify locations to include more work and travel locations. With this note we reiterate our Buy rating, and increase our net store opening run-rate to 80-90 in 2018-21E (vs. 60 previously), and forecast over 2,200 stores by FY21.

“UBS Evidence Lab geospatial analysis allows us to compare the current store footprint for Greggs versus the largest coffee chains and convenience store competitors, looking at data points such as cannibalisation, competitor density, and geographical and demographic features of the store estate. Key conclusions include; (1) Lower levels of same brand cannibalisation for Greggs than Costa Coffee means potential support for increasing store density; (2) Regional share of sites shows Greggs is underpenetrated in areas such as the South West, supportive of growth strategy outlined; and (3) current store numbers for key competitors Costa Coffee and Subway already greater than 25% ahead, with clear growth ambitions highlighting the opportunity in this market for Greggs

“We continue to believe that Greggs offers an attractive story despite UK consumer uncertainty, in particular in coffee which remains a meaningful opportunity as discussed in our March 2017 note here, with potential to increased penetration given its competitive price point. In addition, ongoing supply chain investment means there are defined cost savings planned out to 2020, which will be supportive to margins.”