Pardon the pun, but Greggs (LSE:GRG) shares have taken a big bite out of investors’ wealth in recent times. The FTSE 250 stock has crashed 50% since August 2024!
However, if the selling has now gone too far, this could potentially create solid returns for long-term investors. So, is the stock worth the risk today?
Cooling demand
As I see it, there are two big things negatively impacting Greggs, as well as an emerging potential threat. First, Chancellor Rachel Reeves turned up the heat in late 2004 when she increased the National Living Wage and Employer National Insurance.
Employing more than 32,000 people, Greggs was significantly impacted and subsequently hiked prices on some items, including sausage rolls. Raising prices when many consumers are already struggling financially is never ideal.
Second, the extra burden on employers has had a chilling effect on an already fragile economy. The National Institute of Economic and Social Research is forecasting that unemployment will average 5.4% in 2026, up from 4.8% last year.
Ben Caswell, an economist at the think tank, said: “Part of this unemployment story in the UK is rising labour costs.”
The emerging potential threat I mentioned is GLP-1 weight-loss drugs. Analysts at Jefferies say that weaker consumer spending and unfavourable weather cannot alone explain Greggs’ prolonged sales downturn, with GLP-1s likely part of the picture too.
As many as 1.7m people in the UK are taking these appetite-suppressing drugs today, with millions more considering them in future. Novo Nordisk has recently had a daily Wegovy pill approved in the US, which could see many people scared of needles consider the medication.
Mark your calendars
All this has impacted Greggs’ numbers. In the first half of 2024, total sales rose 13.8%, with like-for-like sales in company-managed shops up 7.4%. In the same period in 2025, these figures were 7% and 2.6%, respectively. A massive drop-off.
Shareholders will get Greggs’ preliminary results for the 52 weeks to 27 December on 3 March. City analysts expect revenue to climb roughly 7% to £2.15bn, largely due to new shop openings (around 120).
However, cash flows and profits are expected to slip as Greggs invests heavily in new distribution centres and absorbs higher costs. Therefore, shareholders should focus on management’s guidance for 2026 and any medium-term commentary.
This needs to be relatively positive or else the stock could remain in the doldrums for a while longer. Investors will want to see proof that the new GLP-1-friendly menu is resonating with customers.
Is out-of-favour Greggs worthy of attention?
Weighing things up, I think Greggs still has a lot going for it. The balance sheet, while temporarily weakened due to growth initiatives, is still fundamentally healthy. Management expects a return to positive cash generation in 2026 as capital expenditures peak.
Moreover, the bakery chain is still growing total and like-for-like sales, despite all the challenges. And there’s a 4.4% dividend yield on offer for investors as they await a turnaround.
If an investor’s willing to look past this rocky patch to the longer term (our preferred investment horizon here at The Motley Fool), I think the stock could do well. Greggs’ unique brand, strong balance sheet, growing store count, and low valuation make this one to consider.
