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Spare a thought for holders of Greggs (LSE: GRG) shares. The sausage roll vendor’s worth has tumbled nearly 40% in 2025 alone. This leaves me questioning whether or not this once-adored FTSE 250 inventory — and one which occupied an area in my very own portfolio a couple of yr in the past — is now oversold.
Spoiler: I believe it is perhaps.
Feeling the warmth
In its most up-to-date replace, the food-on-the-go retailer revealed that like-for-like gross sales in company-managed outlets rose by 2.6% within the first half of its monetary yr. All informed, whole gross sales within the 26-week reporting interval climbed 6.9% to push via the £1bn boundary.
Nevertheless, there was a giant ol’ catch: June’s scorching climate led to decrease footfall within the cities and cities wherein Greggs operates. Throw within the influence of retailer refurbishments and the mid-cap agency mentioned that full-year working revenue would now are available “modestly under” that achieved in 2024.
This was by no means going to go down effectively with a market whose religion within the firm had already been rattled by softer buying and selling earlier within the yr.
Worse to come back?
Since this scorching spell seems to be set to proceed, issues may worsen for the Newcastle-based enterprise. Certain, Greggs will proceed to shift a variety of chilly drinks. However a scorching pasty whereas strolling down a excessive road on a scorching-hot day? That’s a tough promote.
For me, this now makes the following set of interim outcomes — due 29 July — important studying. If there’s a whiff that revenue will now are available ‘materially’ under present estimates, one other leg down seems to be possible.
Even when this doesn’t occur, a worse-than-expected inflation learn subsequent week may very well be sufficient to upset a number of extra buyers. Initially of the month, CEO Roisin Currie and her workforce mirrored that its outlook on prices was “unchanged” and that “mitigation measures are anticipated to boost second-half efficiency“. Would possibly this show optimistic?
Short-term troubles
Right here’s the factor: this heat climate received’t final. And when the rain and cooler temperatures inevitably return, it’s absolutely a great guess to imagine that consumers, workplace staff and travellers will return.
It additionally appears possible that many meals retailers are struggling within the present local weather. Because of its low-priced treats, Greggs needs to be one of many extra defensive of the lot.
Talking of worth, I should buy the inventory immediately for the equal of 13 instances forecast earnings. This seems to be low cost relative to the corporate’s common price-to-earnings (P/E) ratio of 28 during the last 5 years. Truly, that would show to be an excellent cut price if it may possibly proceed rising its retailer property as deliberate. At least 87 new outlets opened their doorways within the first half of 2025.
With the dividend yield presently standing at 3.9%, there’s a pleasant earnings stream too. Regardless of present woes, this could nonetheless be comfortably coated by revenue.
Sitting patiently
When a well-run enterprise suffers a considerable fall in reputation amongst buyers, I’ll at all times have a look. My curiosity then grows if the issues look non permanent.
Summing up, Greggs shares may have additional to fall. However I additionally surprise if a variety of ache is now priced in.
I’ll anticipate that subsequent outlook assertion earlier than deciding whether or not to press the Purchase button.
