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Spare a thought for holders of Greggs (LSE: GRG) shares. The sausage roll vendor’s worth has tumbled nearly 40% in 2025 alone. This leaves me questioning whether or not this once-adored FTSE 250 inventory — and one which occupied an area in my very own portfolio a couple of yr in the past — is now oversold.
Spoiler: I believe it could be.
Feeling the warmth
In its most up-to-date replace, the food-on-the-go retailer revealed that like-for-like gross sales in company-managed retailers rose by 2.6% within the first half of its monetary yr. All instructed, whole gross sales within the 26-week reporting interval climbed 6.9% to push via the £1bn boundary.
Nonetheless, there was an enormous ol’ catch: June’s scorching climate led to decrease footfall within the cities and cities through which Greggs operates. Throw within the affect of retailer refurbishments and the mid-cap agency stated that full-year working revenue would now are available in “modestly beneath” that achieved in 2024.
This was by no means going to go down nicely with a market whose religion within the firm had already been rattled by softer buying and selling earlier within the yr.
Worse to return?
Since this scorching spell appears set to proceed, issues might worsen for the Newcastle-based enterprise. Positive, Greggs will proceed to shift loads of chilly drinks. However a scorching pasty whereas strolling down a excessive avenue on a scorching-hot day? That’s a tough promote.
For me, this now makes the subsequent set of interim outcomes — due 29 July — important studying. If there’s a whiff that revenue will now are available in ‘materially’ beneath present estimates, one other leg down appears probably.
Even when this doesn’t occur, a worse-than-expected inflation learn subsequent week could possibly be sufficient to upset just a few extra traders. Firstly of the month, CEO Roisin Currie and her workforce mirrored that its outlook on prices was “unchanged” and that “mitigation measures are anticipated to boost second-half efficiency“. Would possibly this show optimistic?
Non permanent troubles
Right here’s the factor: this heat climate received’t final. And when the rain and cooler temperatures inevitably return, it’s certainly an excellent wager to imagine that consumers, workplace staff and travellers will return.
It additionally appears probably that many meals retailers are struggling within the present local weather. Because of its low-priced treats, Greggs must be one of many extra defensive of the lot.
Talking of worth, I can purchase the inventory at this time for the equal of 13 occasions forecast earnings. This appears low cost relative to the corporate’s common price-to-earnings (P/E) ratio of 28 during the last 5 years. Really, that would show to be a superb cut price if it will probably proceed rising its retailer property as deliberate. A minimum of 87 new retailers opened their doorways within the first half of 2025.
With the dividend yield at present standing at 3.9%, there’s a pleasant revenue stream too. Regardless of present woes, this could nonetheless be comfortably coated by revenue.
Sitting patiently
When a well-run enterprise suffers a considerable fall in recognition amongst traders, I’ll all the time have a look. My curiosity then grows if the issues look short-term.
Summing up, Greggs shares might have additional to fall. However I additionally marvel if loads of ache is now priced in.
I’ll anticipate that subsequent outlook assertion earlier than deciding whether or not to press the Purchase button.
