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The Greggs (LSE:GRG) share worth has made an terrible begin to the 12 months. Solely months in the past, the inventory was breezily altering arms above £31. In the present day, it’s buying and selling under £18 because the enterprise battles a plethora of challenges.
So, does the FTSE 250 sausage roll retailer now provide an affordable funding alternative? Or have Greggs shares change into a stale worth entice to keep away from?
Let’s discover.
A bitter style
At first look, the collapse within the Greggs share worth would possibly seem unwarranted. Income handed £2bn for the primary time final 12 months and pre-tax revenue rose 8.4% to succeed in £204m. These look like stable numbers, so what on earth’s occurring?
Properly, the inventory market’s typically described as forward-looking. Basically, previous outcomes are yesterday’s story. What actually issues are the clues they’ll present buyers a few agency’s future progress trajectory. On this entrance, there are a number of complications for Greggs shareholders.
Like-for-like gross sales progress has slowed to a snail’s tempo, inching simply 1.7% increased within the first 9 weeks of 2025. The corporate cited “difficult climate situations” in January as an element behind the deceleration. It’s hardly ever a very good signal when a agency’s reaching in charge the British winter for an underwhelming efficiency.
As well as, the Newcastle-based enterprise warned that margins may very well be compressed in 2026 and 2027, impacted by investments in manufacturing, logistics, and distribution. To compound difficulties, will increase to the Nationwide Residing Wage and an increase in employer’s Nationwide Insurance coverage contributions add inflationary stress, which might damage the underside line.
Essentially, it appears the wind has been taken out of the agency’s sails. The Greggs share worth has traditionally loved sturdy optimistic momentum, propelled by speedy progress throughout a number of metrics. Within the cutthroat food-to-go market, the corporate can ailing afford to take a breather whereas rivals snap at its heels.
Silver linings
Though issues could seem gloomy for Greggs, there are countervailing causes to be optimistic. Affected person buyers should be rewarded given the board stays bullish that it might return to its earlier progress trajectory in the long run, even when it takes a number of years.
Plus, there was a saving grace for buyers who prioritise passive earnings. The group’s boosted its full-year dividend by 11% to 69p per share. Dividends are properly coated at two instances anticipated earnings, offering shareholders with a good margin of security.
From a valuation perspective, the Greggs share worth additionally seems extra enticing right this moment. The ahead price-to-earnings (P/E) ratio has decreased significantly relative to the inventory’s historic common. Buying and selling at a a number of of 13 instances ahead earnings, there’s a reputable case to be made that the shares are low-cost right this moment.
Lastly, formidable long-term enlargement plans to function greater than 3,000 UK retailers point out that there might nonetheless be room for additional progress. In 2024, the enterprise celebrated opening its 2,600th store and it goals to ship 140 to 150 new shops this 12 months.
My take
I’ve been impressed with Greggs’ enterprise previously, however the newest outcomes have given me pause for thought. Though the inventory seems low-cost right this moment, I’m reluctant to speculate till I see concrete proof that the agency can return to its glory days. General, I see higher funding alternatives elsewhere.
