Greggs‘ (LSE: GRG) shares have had a rough start to the year. Markets have punished the UK’s favourite high street bakery chain after it posted a sharp slowdown in sales. It’s a blow for investors who sunk their teeth into the FTSE 250 stock expecting a tasty treat.
Greggs has transformed itself into a national treasure through clever marketing and a carefully executed expansion strategy.
It seemed unstoppable, with plans to expand its 2,500-strong store estate towards 3,500, while targeting new locations including railway stations, airports, supermarkets, and retail parks. Greggs is also testing evening openings and enhancing delivery services, which could boost revenue per store and overall profitability.
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This FTSE 250 star’s struggled in 2025
The sausage roll and sandwich maker enjoys strong brand recognition, customer loyalty and consistent sales. In 2021, revenues stood at £1.23bn. Last year, they topped £2bn and the board’s targeting £2.44bn by 2026.
Greggs has another advantage. It owns its production and distribution channels. This helps ease supply chain issues, ensure quality control and enhance margins. Investors fell for the growth story, perhaps a little too hard. Eventually, Greggs shares became pricey.
Last year, the stock traded at around 23 times earnings, well above the FTSE 250 average of 15 times. And that’s the main reason why I didn’t buy them.
Lucky me. Last October’s trading update (1 October) highlighted a slowdown in Q3 sales. An update on 9 January bought more bad news. Like-for-like Q4 sales growth in company-managed shops slowed to 2.5%, down from 5% in the previous quarter. The board cited “subdued high street footfall”.
The autumn Budget, which lifted both employer National Insurance contributions and the Minimum Wage, could add £45m to Greggs’ costs this year. That will rise to £50m in 2026.
The stock’s beginning to look decent value again
Worse, the economy’s slowing and inflation’s rising. This will squeeze disposable incomes, drive up costs and test Greggs’ reputation as an affordable treat.
These pressures have battered the Greggs share price, which has now crashed 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’s down 20%.
For those (like me) who avoided Greggs due to its high valuation, today’s price offers a more attractive entry point. The shares now trade at 16.66 times earnings, while the dividend yield‘s crept above 3%.
This could be a good time to consider investing, but patience is required. While Greggs’ long-term prospects remain solid, the recovery may take a while. So even though the shares are cheaper, I’m not going to buy them.
Call me glum, but I suspect the UK economy could get worse before it gets better.
