Greggs (LSE: GRG) shares used to be so much fun. Investors were mad for the FTSE 250 stock and made good money from it too. But the whole thing got out of hand. Sales slowed, and the stock went from red hot to stone cold faster than you can say vegan sausage roll. What went wrong?
The Newcastle-based bakery chain was once derided for selling fatty British stodge, then feted for the same reason. Driven by a crafty marketing campaign, stores spread across the UK. Not just high streets but shopping centres, railway stations and airports too. It even benefited from the cost-of-living crisis, as a cheeky Greggs was seen as an affordable treat. But as we got poorer, its breakneck sales growth slowed.
What happened to this booming FTSE 250 stock?
During the glory growth years, there was more froth in the share price than its takeaway cappuccinos. The price-to-earnings (P/E) ratio topped 23 at one point. It’s a different story today. The Greggs share price has slumped 17% over the last year, and 33% over five years. But has the sell-off been overdone?
To a degree, I think it has. Greggs still posted record sales in 2025, up 6.8% to £2.15bn. These were driven by store expansion, as it added 121 net new outlets, lifting the total to 2,739. Company-managed shop like-for-like sales increased by 2.4%, boosted by evening openings.
However, underlying pre-tax profit dropped 9.4% to £172m, while margins tightened from 9.7% to 8.7%. This was down to inflation, increased infrastructure investment and the wrong type of weather. So is this an opportunity to get in at a cheaper price?
Today, the Greggs P/E stands at a lowly 12.6, while the trailing dividend yield is a healthy 4.55%. So yes, in some respects, this does look like a buying opportunity to consider. I should also point out that the board held the 2025 dividend at 69p per share. Inevitably, that didn’t go down well with investors.
However, anybody who thought they’d spotted a bargain and sank their teeth into Greggs shares one week ago won’t be feeling very satisfied. They’ve fallen another 7% in the last week. That would have reduced a £4,993 investment (after charges) to £4,643. A quickfire loss of £350.
Is the stock an irresistible bargain?
That’s hardly the end of the world. Nobody should buy shares with the intention of holding for less than five years — ideally much, much longer. So can Greggs bite back?
What it really needs is a full-blooded economic recovery, putting money into people’s pockets. Sadly, the UK seems to be a long way off that, as petrol prices rise and inflation follows. Greggs’ costs will rise, while consumers will struggle. Margins could be squeezed from both sides.
On the plus side, it’s cheap, there’s a decent dividend, and Greggs remains a well-run company and a high street fixture. The shares should do well in the long run, but I think it could be in for another tough year or two. There are plenty of bargain FTSE stocks I favour over this one right now.
