Greggs (LSE: GRG) shares are all the rage. We see this on the Fool. Investors gobble up articles on the UK’s favourite bakery chain. Artificial intelligence (AI) has evidently taken note of its popularity.
This morning, I asked the AI chatbot to name 2 FTSE 250 stocks that look well placed to surge in value in 2025. Its first suggestion was fantasy games manufacturer Games Workshop. Since the stock entered the FTSE 100 in December, ChatGPT’s behind the times. As is often the case, in my experience.
Its second pick was good old Greggs. ChatGPT praised the group’s robust expansion as it increases store count and invest in online channels.
Is this FTSE 250 stock past its best?
There was no mention of the recent slowdown in sales, which made me wary. Then I discovered that the answer to my question was lifted from an article written in September and a lot’s changed since then.
Obviously, ChatGPT’s a computer programme rather than a stock tipster. And to be fair it’s the first to admit it. It’s fun to play with but must be treated with extreme caution. Right now, I’d say the same about investing in Greggs.
The shares had a brilliant run, thanks to a witty marketing drive that neatly positioned its sausage rolls and other pastry-based produce as a cheap treat in tricky times. Naughty but nice and nothing to be ashamed of.
As confidence grew, the board made ambitious plans to boost store count from 2,500 to 3,500, target evening openings, and pioneer outlets in railway stations, retail parks, airports and the like.
Revenues rocketed from £811m in 2021 to £1.8bn in 2023. No wonder investors loved it. On 9 January, we learned they topped £2bn in 2024. But there was a catch.
In the first half of last year, total like-for-like sales rose 13.8%. That slowed to 10.6% in Q3 and just 7.7% in Q4. Consumers are struggling right now, with the board blaming “more subdued high street footfall”.
Margins are being squeezed
As we know, the UK economy’s having a tough time. Growth has pretty much flatlined since the election, and a recession’s possible. Even Greggs will struggle to grow given the gloomy outlook for the high street. Budget employer’s national insurance and minimum wage hikes will squeeze margis.
The board’s ploughing on, with a strong pipeline of new shop openings, while shuttering underperformers to keep margins high. It’s also broadening its menu and enhancing digital capabilities, while working on its supply chain.
But analysts are forecasting sales growth of just 2.9% in the year ahead. If correct, that would mark a further slowdown.
On the plus side, the shares are cheaper. Last year, they had a price-to-earnings ratio of more than 22. That’s now slipped below 17 times.
Some far-sighted investors might consider this an opportunity to buy Greggs shares, which may recover when the economy does. I don’t think we’re there yet and will be shopping elsewhere for FTSE 250 bargains. Whatever ChatGPT ‘thinks’.
