Greggs (LSE:GRG) shares have experienced a significant downturn, with the stock plummeting 34% over the past two years. This decline reflects the challenging market conditions and subdued consumer confidence that have impacted the bakery chain’s performance.
As such, £10,000 invested in the shares two years ago would now be worth around £6,600. Even including a modest dividend, this is a substantial loss for investors.
Off the boil
The company’s recent performance has been lacklustre, with sales growth slowing considerably at the start of the 2025 financial year. Like-for-like sales in company-managed shops increased by a mere 1.7% year-on-year in the first nine weeks of 2025, with Greggs citing “challenging” weather conditions in January as a contributing factor.
While Greggs did manage to surpass the £2bn sales mark in 2024, with total sales up 11.3% to £2.01bn, the fourth quarter of 2024 saw a marked slowdown in like-for-like sales growth to 2.5%. This deceleration was attributed to weaker consumer confidence and reduced high street footfall.
According to chief executive Roisin Currie, macroeconomic challenges are an issue for the company, noting that many customers continue to worry about their financial situation. However, I’d suggest that there’s evidence that the cost-of-living crisis actually shifted customers attentions away from more expensive food-to-go, like Pret, and towards Greggs.
Despite these challenges, Greggs continues to expand its store network, opening a record 226 new shops in 2024. However, the company’s ability to maintain its growth trajectory in the face of economic pressures remains uncertain. While Greggs’ value-for-money proposition may provide some resilience, the current market conditions suggest a cautious outlook for the stock in the near term.
Still a bit dear
Greggs stock is much cheaper today on a forward price-to-earnings (P/E) basis. The stock currently trades around 13.5 times forward earnings. This is considerably down from the 25 times earnings last year.
But this isn’t a clear sign that the stock’s undervalued. While forecasting data is limited, analysts are pointing to earnings per share (EPS) growth around 5%. In turn, this would lead to a price-to-earnings-to-growth (PEG) ratio above two. Even adjusted for dividends, the data I’m seeing points to a vastly over-valued stock.
Typically, I wouldn’t need to look beyond this data. But it’s also important to note that Greggs has a modest net debt position and it doesn’t own the stores it operates — so these can’t go down as assets.
I’d also add that Greggs may struggle to find additional physical space to grow in the UK beyond the medium term. It’s already well represented on our high streets and increasingly so at transport hubs.
What’s more, there’s a slow trend towards healthier eating, and Greggs simply doesn’t fit into that narrative. In fact, I recently saw someone suggesting that a tuna baguette was a healthy option in Greggs… but 63g of white bread probably isn’t good for anyone.
So it goes without saying that I won’t be buying Greggs shares.
