Owning Greggs (LSE:GRG) shares is proving to be a painful experience of late. I know this all too well, as someone who opened a position in the company in late November.
Bad news often comes in threes, as they say, and Greggs’ share price has been pounded by a triple dose of alarming trading updates since the autumn. It toppled again on Tuesday (4 March) as investors digested the firm’s full-year trading statement.
Someone who invested £10,000 in Greggs shares a year ago would now have just £6,964 to show for their investment. So should existing investors cut and run? Or is now the time to consider loading up on the baked goods giant?
Forecasts topped
Full-year numbers from the FTSE 250 firm were actually a bit better than analysts had predicted. Yet Greggs shares still slumped another 8.6%.
At a shade over £2bn, revenues rose 11.3% in 2024 to new record highs. Underlying operating profit of £195.3m actually topped City expectations by £1m-£2m, and represented a 13.7% year on year increase.
Pre-tax profit rose 8.3% from 2023 levels, to £203.9m. Net cash and cash equivalents stood at £125.3m, down from £195.3m a year earlier.
Continued profitability and balance sheet resilience encouraged Greggs to hike the full-year dividend, to 69p per share from 62p previously.
Sales slowdown
Unfortunately Greggs’ statement also showed the trend of weakening sales growth has continue. Like-for-like sales growth in company-managed shops was just 1.7% in the first nine weeks of 2025.
To put that into context, corresponding sales growth across the whole of 2024 was 5.5%. By the fourth quarter it had dropped to 2.5%. Gone are the days the baker used to enjoy double-digit like-for-like revenues growth which, in turn, has led to an unsurprising re-rating of Greggs shares.
Today, they command a price-to-earnings (P/E) ratio of 13.3 times. That’s a far cry from a reading of 22-23 times they carried just six months ago, a premium that reflected the company’s bright growth outlook.
On the plus side…
With labour costs rising (though higher National Insurance contributions and the National Living Wage hike), and tough economic conditions impacting retail spending, Greggs has some significant challenges in the near term.
But I’d argue that Greggs isn’t quite the binfire that its share price drop suggests. In fact, I think there are still reasons for investors to feel optimistic.
Given the broader consumer environment, growth of 1.7% at the start of 2025 may be considered a robust result. Encouragingly, the company has said it had enjoyed “improved trading in February” following the weather-affected January too.
The company’s growth strategy also continues to produce tasty rewards. Increased investment in digital is paying off, driving delivery sales 30.9% higher in 2024.
Elsewhere, evening trading remains brisk, the business noting that “post-4pm trading [is again] the fastest growing daypart“. No wonder then, that Greggs is still extending trading hours across a growing number of shops.
Finally, the retailer is targeting 140-150 net shop openings in 2025 to help it grow earnings. These will be concentrated in potentially lucrative destinations like retail parks, rail stations and supermarkets too, as Greggs’ pivot from the moribund high street continues.
Following their price re-rating, I think Greggs shares are worth a close look from savvy investors.
