Greggs (LSE: GRG) shares had a poor 2025. The high street food-to-go chain fell around 25% and is down 40% over three years. That’s painful for holders of the FTSE 250 stock — but is it a buying opportunity for those who don’t own it?
At a time when many city centres look increasingly desolate, Greggs’ blue-and-yellow signage can be rare point of light. Its branding now pops up everywhere, including retail parks, roadside locations, railway stations and even airports. The company’s quirky marketing, especially its perfectly cooked concept of the vegan sausage roll, has also attracted outsized attention from investors.
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On one level there’s a solid underlying business case. Greggs has expanded rapidly, pushing its outlet count towards the 2,700 mark while shuttering sites that failed to make the grade. Even so, it couldn’t escape the cost-of-living crisis. Sales growth began to slow in the autumn of 2024, and that trend continued through 2025.
Greggs has been a curious business. For a while it benefitted from shoppers having less to spend, offering them a treat they could afford. But eventually the consumer squeeze became too severe, even for Greggs. There’s no guarantee it will benefit if the economy improves. Shoppers might simply trade up. But given the state of the UK today, we’re a long way from that.
The other oddity was valuation. For a purveyor of cut-price pastries, the high-flying Greggs share price became expensive. The price-to-earnings (P/E) ratio climbed above 22, while the dividend yield slipped to a meagre 2%. That’s when I began to worry. It felt like the shares had outrun the growth story. My concern has been largely borne out. Sales continue to grow but at a slower pace, and that alone was enough to knock the stuffing out of the stock.
Today, the numbers look very different. Its P/E has fallen to around 10.9 and the dividend yield has climbed to a more nourishing 4.2%. I like buying out-of-favour shares, if I can bag a lower entry price and higher income. So can Greggs deliver?
Sales up, profits flat
Many investors hoped 2026 would be the year the shares staged a recovery, but so far that hasn’t happened. The price is down another 2% this year, while the FTSE 250 has risen 3.7%. Someone with £10k in the stock would now have £9,800. Over 12 months, Greggs would have turned £10k into just £7,500.
On 8 January Greggs warned full-year profits would be flat, as consumer confidence remains sudued. New supply chain capacity will also put pressure on margins. The shares fell almost 7% on the day. There were some positives as Q4 sales rose 7.4% year-on-year, although like-for-like sales in company-managed shops increased a more modest 2.9%.
There’s a case for Greggs slowing its expansion to focus on efficiency and profitability. The country can only stomach so many sausage rolls. At today’s reduced price, I think the shares are worth considering with a long-term view. But in the short term, the outlook is a bit flaky.
