Since April 2021, Greggs’ (LSE:GRG) shares have fallen 28%. It means a £5,000 investment made today (16 April) would buy 86 more shares than it would have five years earlier. In cash terms, the initial stake would now be worth £3,600, excluding the impact of the dividends received.
But that’s not the full story. The baker’s stock is now changing hands for 51% less than it was in December 2021 when it recorded its five-year high.
So what’s going on? Why has an icon of the British high street fallen so far out of fashion? More importantly, could now be a good time to consider taking a stake? Let’s take a closer look.
Out of favour
According to recent data, Greggs is the UK’s third most-shorted stock. Thirteen investment firms have borrowed 12.49% of the group’s shares (currently worth £210m) in the expectation they will fall in value. Of course, this doesn’t necessarily mean it will happen. It’s only a small sample of opinions.
But let’s leave this to one side and judge the investment case using some of the key performance indicators that the group uses to assess its own performance.
Slowing down
The first thing to note is that sales are increasing. Revenue during the 52 weeks ended 27 December 2025 (FY25) was 75% higher than in FY21.
However, the rate of increase in both total sales and like-for-like sales is slowing. Even when the exceptional 2021 bounceback from the pandemic is ignored, the slowdown’s significant.
| Financial year | Total sales growth (%) | Like-for-like sales growth (%) |
|---|---|---|
| 2025 | 6.8 | 2.4 |
| 2024 | 11.3 | 5.5 |
| 2023 | 19.6 | 13.7 |
| 2022 | 23.0 | 17.8 |
| 2021 | 51.7 | 52.4 |
By contrast, the group’s earnings, particularly on a per share basis, are flat. Comparing FY25 with FY23, there’s been little change. Increases in Employers’ National Insurance and the National Living Wage have affected the group’s bottom line. Supply chain inflation has increased direct costs.
| Financial year | Profit before tax (£m) | Diluted earnings per share (pence) |
|---|---|---|
| 2025 | 171.9 | 122.8 |
| 2024 | 189.8 | 137.5 |
| 2023 | 167.7 | 123.8 |
| 2022 | 148.3 | 117.5 |
| 2021 | 145.6 | 114.3 |
Another issue
Also of concern, capital expenditure’s increasing but the group’s return on capital employed (ROCE) is falling. In other words, it’s spending more but getting less back. Some of this is to be expected given that it’s continuing to open more stores. The marginal return from each new shop is likely to fall as the best locations have already been secured.
Had the group achieved the same ROCE in FY25 as it did in FY21, its earnings would have been £20m higher. This would have been enough to completely change the perception of its financial performance over the past five years.
| Financial year | Capital expenditure | Return on capital employed (%) |
|---|---|---|
| 2025 | 288 | 16.0 |
| 2024 | 249 | 20.3 |
| 2023 | 200 | 21.1 |
| 2022 | 111 | 21.0 |
| 2021 | 57 | 23.0 |
What does all this mean?
But there’s no point dwelling on ‘ifs’ and ‘maybes’. The reality is that Greggs’ revenue and earnings aren’t growing as fast as would be expected of a FTSE 250 business. Investors are prepared to overlook this if they can see a clear path to recovery but the relatively higher number of those that have shorted the stock suggest there’s a high degree of uncertainty.
Despite its woes, Greggs retains a strong brand and remains a British success story. But I think the jury’s out on whether it’s going to recapture former glories.
Weight-loss drugs pose a threat – it’s estimated that around 5% of adults are using them – and a move towards healthier eating is another challenge. The group’s adapting by offering smaller calorie dense alternatives but, let’s be honest, it’s hard to beat the taste of sugar and fat.
So as much as I love Greggs, I think there are better opportunities to consider elsewhere.
