The FTSE 250 is often home to the UK’s more domestically focused companies. Unlike the FTSE 100 giants with global reach, these mid-caps can be more vulnerable when the local economy slows. And few names are as tied to the fortunes of British high streets as Greggs (LSE: GRG).
This year, the nation’s favourite baker has endured a torrid time. A household brand famed for its sausage rolls, steak bakes, and vegan options, it has become the biggest loss-making share on the FTSE 250 in 2025.
Let’s take a look at what has gone wrong and whether the company can claw back some value for shareholders.
A brutal fall
So far this year, Greggs’ shares have dropped 43%. For the 26 weeks to 28 June, pretax profit slipped 14.3% to £63.5m, down from £74.1m a year earlier. Operating profit fell to £70.4m from £75.8m.
Interestingly, sales still rose past £1bn, up from £960.6m. But like-for-like growth slowed, and heavy investment in supply and manufacturing has squeezed margins.
Analysts Darren Shirley and Clive Black at Shore Capital have even questioned whether the chain has reached “peak relevance”. That is a worrying thought for such an iconic high street presence.
Pushing forward
Greggs, however, is pressing ahead with expansion. In the first-half of the year, it opened 87 new shops while closing 56, resulting in 31 net additions. At the end of June, 2,649 shops were trading. Management still expects to open between 140 and 150 new shops in 2025.
“I completely do not believe we’ve reached peak Greggs”, CEO Roisin Currie insisted in an interview with Reuters. “There are still significant parts of the UK where you cannot access a Greggs.”
That optimism is welcome, though challenges remain. Last month, the company warned that full-year profits could be “modestly below” 2024 levels after sales were hit by June’s heatwave.
Financials look tempting
From a valuation perspective, Greggs now looks cheap. A forward price-to-earnings (P/E) ratio of 12.8 and a price-to-sales (P/S) ratio of 0.77 suggest the market may be underestimating the business.
The balance sheet is healthy enough, with a debt-to-equity (D/E) ratio of 0.79 – although a quick ratio of 0.3 highlights potential liquidity pressure if conditions worsen.
Perhaps most appealing is the dividend yield, currently sitting at 4.4%. With a payout ratio of 48.5%, the income looks sustainable for now. For income investors, that is a tasty prospect.
Risks ahead
Greggs’ traditional model of selling indulgent baked goods may be losing steam. The firm has worked to diversify into healthier sandwiches and salads, but rivals such as Sainsbury’s and Tesco already dominate that space at lower prices. If customers fall out of love with sausage rolls, the dividend alone won’t save the company.
In my opinion, Greggs looks attractively undervalued at today’s price. And with both income and recovery potential, it’s a stock worth considering, in my book. But the risk is clear: if the chain cannot adapt to shifting tastes, it could face a long slide towards irrelevance.
Personally, I would hate to see this British institution disappear from the high street, so I really hope it’s got a few more tricks up its sleeve.
