Greggs‘ (LSE:GRG) shareholders can’t seem to catch a break as the stock dropped almost 5% in the FTSE 250 today (9 February). This takes the fall since May to 26%, and the 18-month decline to 50%.
The food-on-the-go retailer doesn’t report its full-year results for 2025 until March. So what’s going on here?
Broker downgrade
When we think about disruption, it’s often in relation to tech stocks and artificial intelligence (AI). It’s when a new technology or changing consumer behaviour hurts or threatens an existing business.
Recently, we’ve had lots of UK stocks sell off due to the threat of AI, including RELX and Rightmove. However, disruption can come in a few forms, and arguably the most powerful medical breakthrough in recent times is GLP-1 weight-loss drugs.
People on these experience less cravings for fatty and sugary food. So as more take Wegovy and Mounjaro, the way they shop and eat is changing.
Greggs CEO Roisin Currie recently said there’s “no doubt” that GLP-1s are affecting the business. And today, analysts at Jefferies weighed in on the matter by downgrading the stock from Buy to Hold.
“We are increasingly of the view that rapid uptake of GLP‑1 weight‑loss drugs is impacting Greggs“, the broker wrote. It massively lowered its price target, from 2,500p to 1,610p, which is basically where it is right now.
How serious is this threat?
According to University College London, an estimated 1.6m used these drugs in England, Wales and Scotland between early 2024 and early 2025. Given that data was from a year ago, we can assume the figure has gone higher.
The researchers also discovered that another 3.3m people were interested in taking the medication in the near future. Interest was higher among poorer groups where obesity is more prevalent.
As we know, Greggs is popular due to its value proposition. So there’s a risk the company could be disproportionately impacted by the rise of GLP-1 drugs among its most frequent customers.
Combine all this with a weak economic backdrop, and it’s understandable why Greggs is currently the most shorted UK stock. In other words, sophisticated investors like hedge funds are betting it has further to fall.
Domino’s Pizza Group from the FTSE 250 is also heavily shorted, probably for the same reasons.
Can Greggs adapt?
As mentioned, the company is aware of this and has been responding by serving up healthier food with higher protein content. I’ve noticed this pivot in my local shop recently, with more sandwiches, egg pots and salads on display than high-calorie pasties and pizzas. Customers were buying a wide range of food.
Despite downgrading the stock and expecting some GLP-1 impact, Jefferies still sees Greggs as “high quality“. It expects solid like-for-like sales numbers in 2026 due to the problems with weather last year (heavy snow and heatwaves).
And to state the obvious, people still need to eat when taking these medications. I think Greggs will successfully adapt to changing consumer behaviour, and may even attract new customers over time due to its heathier range of food offerings.
The short term looks a bit flaky here. But after its 50% fall, Greggs stock is trading pretty cheaply and offering a 4.3% dividend yield. I think it’s a recovery stock worth thinking about.
