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Greggs‘ (LSE: GRG) shares have had a tough begin to the yr. Markets have punished the UK’s favorite excessive avenue bakery chain after it posted a pointy slowdown in gross sales. It’s a blow for traders who sunk their tooth into the FTSE 250 inventory anticipating a tasty deal with.
Greggs has remodeled itself right into a nationwide treasure by means of intelligent advertising and a rigorously executed growth technique.
It appeared unstoppable, with plans to increase its 2,500-strong retailer property in direction of 3,500, whereas focusing on new places together with railway stations, airports, supermarkets, and retail parks. Greggs can also be testing night openings and enhancing supply providers, which might increase income per retailer and total profitability.
This FTSE 250 star’s struggled in 2025
The sausage roll and sandwich maker enjoys robust model recognition, buyer loyalty and constant gross sales. In 2021, revenues stood at £1.23bn. Final yr, they topped £2bn and the board’s focusing on £2.44bn by 2026.
Greggs has one other benefit. It owns its manufacturing and distribution channels. This helps ease provide chain points, guarantee high quality management and improve margins. Traders fell for the expansion story, maybe just a little too onerous. Finally, Greggs shares turned expensive.
Final yr, the inventory traded at round 23 instances earnings, effectively above the FTSE 250 common of 15 instances. And that’s the principle motive why I didn’t purchase them.
Fortunate me. Final October’s buying and selling replace (1 October) highlighted a slowdown in Q3 gross sales. An replace on 9 January purchased extra dangerous information. Like-for-like This fall gross sales development in company-managed outlets slowed to 2.5%, down from 5% within the earlier quarter. The board cited “subdued excessive avenue footfall”.
The autumn Finances, which lifted each employer Nationwide Insurance coverage contributions and the Minimal Wage, might add £45m to Greggs’ prices this yr. That can rise to £50m in 2026.
The inventory’s starting to look respectable worth once more
Worse, the economic system’s slowing and inflation’s rising. This can squeeze disposable incomes, drive up prices and take a look at Greggs’ popularity as an inexpensive deal with.
These pressures have battered the Greggs share worth, which has now crashed 27% because the begin of the yr. An investor who put £10,000 into Greggs on 2 January would have simply £7,300 at this time. That’s a lack of £2,700. Over 12 months, the inventory’s down 20%.
For these (like me) who averted Greggs on account of its excessive valuation, at this time’s worth presents a extra engaging entry level. The shares now commerce at 16.66 instances earnings, whereas the dividend yield‘s crept above 3%.
This may very well be a superb time to contemplate investing, however persistence is required. Whereas Greggs’ long-term prospects stay stable, the restoration might take some time. So though the shares are cheaper, I’m not going to purchase them.
Name me glum, however I think the UK economic system might worsen earlier than it will get higher.
