During the pandemic, Greggs‘ (LSE:GRG) shares tumbled as, initially, the baker’s shops were forced to close and then an increasing number of people started to permanently work from home.
But as things slowly returned to normal, the group’s share price began to recover. However, it’s now (13 February) less than half what it what it was at the end of 2021.
What’s behind this trend? And if someone were to buy now, could they benefit from a bit of a comeback? Let’s see.
First, the good news…
In my opinion, Greggs is a British success story with a great brand. Even Taylor Swift appears to be a bit of a fan. And with over 2,700 stores, the baker’s well on its way to achieving its target of 3,000 shops.
During the 52 weeks to 27 December 2025 (FY25), the company reported an increase in sales of 6.8% compared to FY24. However, this was helped by 207 new shops opened during the year. On a like-for-like basis, sales increased by a more modest 2.4%.
Positively, the group retained a net cash position of £47m. And it said it was on track to deliver full-year pre-tax earnings in line with forecast.
… and the not-so-good
However, the group faces a number of challenges. Supply-chain inflation and increased employment costs have impacted earnings. And with incomes coming under pressure, it’s difficult to pass these on to customers.
Of concern, the rate of sales growth is slowing.
But it’s the emergence of weight-loss drugs that could pose an existential threat. Greggs’ boss recently said there was “no doubt” that ‘fat jabs’ are affecting the business.
And to give some idea as to how quickly things are changing, the impact of these doesn’t feature among the principal risks identified in the group’s 2024 annual report. Instead, the emphasis was on the trend towards eating less meat and the health impact of eating ultra-processed foods.
The investment case therefore rests on whether Greggs can continue to adapt to these changing tastes.
One broker, Jefferies, recently downgraded the stock warning that weight-loss drugs are likely to create an “enduring challenge” for the group. Despite its pessimism, the bank said the group remained a quality operator which, along with its robust cash generation, meant it was still a “compelling long‑term rollout opportunity”.
Final thoughts
There’s lots to admire about Greggs. It’s already embraced healthier eating and its huge footprint in prominent locations means it remains convenient for hungry shoppers, workers, and travellers.
And in my opinion, its recent share price performance doesn’t reflect the underlying quality of the business. However, one advantage of this fall is that new investors can avail of a dividend of around 4.3%, based on amounts paid over the past 12 months.
| Financial year | Interim dividend (pence) | Final dividend (pence) | Special dividend (pence) | Total dividend (pence) |
|---|---|---|---|---|
| 2.1.21 | – | – | – | – |
| 1.1.22 | 15 | 42 | 40 | 97 |
| 31.12.22 | 15 | 44 | – | 59 |
| 30.12.23 | 16 | 46 | 40 | 102 |
| 28.12.24 | 19 | 50 | – | 69 |
But if earnings were to slide, there’s a strong chance the payout will be cut. Indeed, Greggs has a very erratic dividend history with the occasional special payment supplementing its usual interim and final dividends.
On reflection, the dip looks like a buying opportunity to me, although I think it’s at the higher end of the risk spectrum. But with a strong brand, healthy balance sheet, and a good track record in adapting to market trends, I think it’s a stock to consider.
However, cautious investors might be more comfortable looking at other opportunities.
