It may offer four sausage rolls for not much more than a couple of quid, but Greggs was knocked back last night by fears penny-pinching workers are avoiding the bargain baker and making their own lunches instead.
The group – with more than 1,500 stores across the country – dropped 18p to 513.5p after Oriel Securities reiterated its "sell" recommendation ahead of the release of Greggs' interim results next month. The broker said it feared "earnings momentum may be turning negative" and cited a survey in the trade publication The Grocer which claimed the number of adults taking their own food to work has risen 3 per cent year on year.
"The lunchbox is back," stated Oriel's analysts, who warned that the group would be badly hit by a drop in consumer confidence. "There will, of course, be customers who 'trade down' to Greggs," they said, "but our view is that if people are willing to trade down from Asda to Lidl or Aldi, then many will surely also be willing to cut their own sandwiches to save 50p a day."
They also supported their negative stance by pointing to recent profit warnings from the world's biggest bakery products supplier CSM and the pork producer Cranswick, which yesterday saw a small rebound of 19.5p to 648.5p after dropping nearly 15 per cent on Tuesday.
"Both these manufacturers warned as a consequence of higher raw material costs," said the analysts, "and whilst Greggs has flagged that this would be an issue this year, we wonder if forecasts truly reflect the pressure that gross margins are under."
As another session passed without a resolution to the US debt crisis, the FTSE 100 retreated 73.15 points to 5,856.58. The banks led the index down thanks to a number of factors, including Santander becoming the latest in the European sector to release disappointing figures after poor updates from UBS and Deutsche Bank on Tuesday.
Meanwhile, Goldman Sachs decided to downgrade its advice on the continent's banks to "neutral", while Morgan Stanley warned that both Royal Bank of Scotland – down 1.16p to 35.01p – and Lloyds Banking Group – down 1.94p to 43.24p – are facing a large hit if the FSA decides to hike the risk weighting on commercial real estate loans.
BT dipped 4.8p to 190.7p as market voices noted increasing pessimism ahead of today's first-quarter results from the telecoms group. There was also bad news from Virgin Media – which has a second listing on the main market, and which fell 36p to 1,684p – with the company losing 36,000 cable customers over the second quarter.
Just 12 blue-chip stocks finished the day ahead, with Autonomy top of the pile after powering up 64p to 1,720p. The software group revealed its quarterly sales had increased by 16 per cent in the second quarter, and also hinted at a potential spin-off of its Aurasma augmented reality platform.
After the bell it was revealed that Vedanta Resources, which slipped back 32p to 1,799p, had managed to get its controversial remuneration report passed at its annual meeting in London, although there was a 13.7 per cent vote against it.
Its full-year pretax profit may have nearly tripled, but expectations for Renishaw were clearly even higher as the engineer plummeted 196p to 1,690p on the FTSE 250, a loss of over 10 per cent. However, traders were still full of praise for the company, which has risen by a third this year alone, with one trader speculating that its slide could result in it receiving further bid attention.
Meanwhile, Provident Financial saw almost as big a move in the opposite direction, shooting up 86p to 1,115p after the subprime lender revealed its first-half profits had jumped by 15 per cent.
Confirming the recent rumours that an agreement was imminent, Aegis announced a £525m deal to sell its marketing research business Synovate to Ipsos. Despite persistent speculation that such a move would turn the advertising group into a takeover target itself, it ended up sliding 4p to 159.5p, with investors taking profits after a rise of nearly 8 per cent over the last six sessions.
Hopes the London Stock Exchange will receive an approach took a knock after Nasdaq – often the subject of rumours that it is considering a bid – played down chatter it was looking at making acquisitions as it revealed its second-quarter figures. LSE ended trading 43p weaker at 1,002p, although much of the damage was done by the fact it was trading ex-dividend.
Down among the small-cap stocks, Sportingbet ticked up 1.25p to 56.25p amid vague rumours that it could be nearing a deal to be bought by Ladbrokes – up 0.9p at 147p – with talk of a price between 75p and 85p a share. The chatter was helped by the online gaming group announcing that it was mulling a disposal of its Turkish website, given recent speculation that such a move would make Ladbrokes even more keen on tying up a deal.