Its shops are a familiar sight on Britain’s high streets and legions of people tuck into its snacks each day. But does Greggs (LSE: GRG) pass the tastiness test when it comes to potential investors too? Since I bought Greggs shares several months ago, they have more or less gone sideways. So, what might the longer term look like?
2025 has been painful for Greggs
To start with, consider the performance of the baker so far this year.
Despite its own approach to sweet yum yums and the like, there is no way to sugarcoat this. Greggs shares have been a disaster thus far in 2025. Specifically, they have lost 35% in value. £10K invested at the start of January would now be worth £6,500. Ouch.
Yes, the 3.7% dividend yield looks quite tasty. But that barely scratches the surface when it comes to mitigating that miserable performance.
Still, past performance is not necessarily an indicator of what may happen in future. One benefit of the falling price of Greggs shares has been that they now trade for around 12 times earnings. That looks cheap to me and explains why I bought Greggs shares this year.
A temporary blip, or longer-term problem?
Still, that sort of fall does not happen without reason. And the share price has shown little sign of kicking back into life at any point lately.
So, what is going on?
I think the City has been alarmed by the fact that Greggs is on the wrong side of many developments in the UK economy. From weakening high street footfall, minimum wage workers and National Insurance contributions to soaring coffee bean prices, Greggs is likely to take a hit to its profits this year from all sorts of directions.
But does that really matter? After all, costs can often be passed on to customers in the form of higher retail prices. Greggs is already competitively priced, so pushing prices up a bit may not have too bad an impact on sales volumes.
Meanwhile, the business has proved time and again that it knows how to make what people want, at scale and at a competitive cost.
This high-volume sales strategy has seen the chain expand over the course of decades. Not only do I think it can build on past successes, I also reckon Greggs can use its existing assets to grow in areas it has previously largely ignored, such as evening meals.
I plan to hold
Based on that, I reckon the shares continue to look attractively priced.
The fact that they are currently not recapturing much of the ground lost this year in terms of share price does not bother me.
As a long-term investor, my approach is to buy what I think are attractively priced shares in great companies, then hold on to them. Greggs strikes me as an excellent business with a proven model.
So, I am happy to sit back, let dividends roll in and wait while — hopefully — ongoing business success eventually pushes the share price upwards.
