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Greggs‘ (LSE: GRG) shares have had a rough start to the year. Markets have punished the UK’s favorite high street bakery after it posted a sharp drop in sales. It hurts investors who have sunk their teeth into it FTSE 250 the stock is waiting for a good meal.
Greggs has turned itself into a national treasure through smart marketing and a carefully crafted expansion strategy.
It has proved unstoppable, with plans to expand the store’s capacity to 2,500 to 3,500, while targeting new locations including train stations, airports, shopping malls and retail parks. Greggs is also exploring evening openings and improving delivery services, which can increase revenue per store and overall profit.
This FTSE 250 star struggled in 2025
The sausage and sandwich maker enjoys strong brand recognition, customer loyalty and consistent sales. In 2021, revenue stood at £1.23bn. Last year, they topped £2bn and the board was aiming for £2.44bn by 2026.
Greggs has another advantage. It owns its own production and distribution channels. This helps to alleviate supply chain problems, ensure quality control and improve margins. Investors fell because of the growth story, perhaps too hard. Finally, Greggs shares are very expensive.
Last year, the stock traded at about 23 times earnings, more than the FTSE 250 average of 15 times. And that’s the main reason why I don’t buy them.
I’m lucky. Last October’s trade update (October 1) highlighted a drop in Q3 sales. The update on January 9 bought some bad news. Q4 like-for-like sales growth at company-owned stores slowed to 2.5%, down from 5% in the previous quarter. The board quotes “reduced high street footfall”.
The autumn budget, which raised employer National Insurance contributions and the Minimum Wage, could add £45m to Gregs costs this year. That will rise to £50m by 2026.
The stock is starting to look decent value again
Worse, the economy is slowing down and inflation is rising. This will squeeze disposable income, drive up costs and test Greggs’ reputation as an affordable treatment.
These pressures have weighed on Greggs’ share price, which has fallen 27% since the start of the year. An investor who put £10,000 into Greggs on 2 January would have just £7,300 today. That’s a loss of £2,700. Over 12 months, the stock is down 20%.
For those (like me) who avoided Greggs due to its high valuation, today’s price offers a very attractive entry point. Shares now trade at 16.66 times earnings, while the dividend yield comes in at over 3%.
This can be a good time to consider investing, but patience is required. Although Gregs’ long-term prospects remain strong, recovery may take a while. So even if the shares are cheap, I will not buy them.
Call me glum, but I suspect the UK economy may get worse before it gets better.
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