Shares in Greggs (LSE:GRG) have fallen around 20% over the past three years. A £10,000 investment made in August 2022 would now be worth around £8,000, with the share price under pressure from a mix of slowing growth, rising costs, and macroeconomic challenges.
Slowing growth
While total sales and store openings have continued to grow — with the portfolio now extending to more than 2,600 locations — like-for-like (LFL) sales momentum has weakened sharply. Greggs reported 13.7% LFL growth in 2023, but this slowed to just 2.6% by the first half of 2025. For a business that has long traded on growth expectations, this deceleration has raised concerns, including worries that Greggs may be nearing saturation in the UK market.
Cost pressures have added to the difficulties. Input inflation in energy, ingredients, and employment costs has eaten into margins. While Greggs has passed on some of these increases to customers, rising costs and continued investment in new supply chain infrastructure have dented profitability. In the first half of 2025, pre-tax profit fell 14.3% year on year despite top-line revenue growth. This highlights the impact of margin compression.
Fair weather customers
External factors haven’t helped either. Adverse weather patterns have weighed on trading, with an unusually cold January hitting footfall and a June heatwave suppressing demand for Greggs’ traditionally hot product mix. While such disruptions are likely temporary, they’ve added volatility to results and frustrated recovery hopes.
Perhaps most significantly, consumer behaviour’s shifted. Greggs actually performed really well during the cost-of-living crisis. This may have reflected customers moving away from more expensive food-to-go and replacing it with Greggs’s cut-price pastry goods. That trend could be reversing as the economic environment becomes slightly less challenging for more cost-sensitive customers.
I’d also hypothesise that the prevalence of GLP-1s — drugs like Ozempic and Mounjaro — may also be having some impact on fast-food consumption in the UK. With as much as 4.1% of the population taking these appetite-suppressing injections, it seems logical that this could have a material impact on demand for food-to-go.
Valuation’s always key
Valuation’s very important in the equation too. Greggs had enjoyed a premium rating after years of strong growth, but when momentum faltered, the stock de-rated quickly. But let’s be honest, a UK-based sausage-roll maker should never have been trading near 25 times earnings in the first place.
In 2025, Greggs shares have been among the FTSE 250’s worst performers — down 42%. This has made the valuation more palatable on a near-term basis, but still problematic when we factor in the apparent growth trajectory.
The stock now trades at 13.1 times forward earnings and this falls modestly to 11.8 times by 2027. This clearly isn’t great growth. However, when coupled with a 4.2% dividend yield, rising modestly again to 4.3% by 2027, the valuation becomes more acceptable.
Looking ahead, Greggs remains a strong brand with a loyal following and long-term growth potential. It also has an impressive balance sheet. However, personally, I believe investors should consider looking elsewhere. Growth’s expected to be muted and I have concerns about the broader value proposition.
