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The Greggs (LSE:GRG) share worth has made an terrible begin to the yr. Solely months in the past, the inventory was breezily altering palms above £31. At present, it’s buying and selling beneath £18 because the enterprise battles a plethora of challenges.
So, does the FTSE 250 sausage roll retailer now supply an inexpensive funding alternative? Or have Greggs shares turn into a stale worth entice to keep away from?
Let’s discover.
A bitter style
At first look, the collapse within the Greggs share worth may seem unwarranted. Income handed £2bn for the primary time final yr and pre-tax revenue rose 8.4% to achieve £204m. These look like stable numbers, so what on earth’s occurring?
Effectively, the inventory market’s usually described as forward-looking. Primarily, previous outcomes are yesterday’s story. What really issues are the clues they will present traders a few agency’s future development trajectory. On this entrance, there are a number of complications for Greggs shareholders.
Like-for-like gross sales development has slowed to a snail’s tempo, inching simply 1.7% increased within the first 9 weeks of 2025. The corporate cited “difficult climate circumstances” in January as an element behind the deceleration. It’s not often signal when a agency’s reaching in charge the British winter for an underwhelming efficiency.
As well as, the Newcastle-based enterprise warned that margins may very well be compressed in 2026 and 2027, impacted by investments in manufacturing, logistics, and distribution. To compound difficulties, will increase to the Nationwide Residing Wage and an increase in employer’s Nationwide Insurance coverage contributions add inflationary strain, which might damage the underside line.
Essentially, it appears the wind has been taken out of the agency’s sails. The Greggs share worth has traditionally loved robust optimistic momentum, propelled by speedy development throughout a number of metrics. Within the cutthroat food-to-go market, the corporate can ailing afford to take a breather whereas rivals snap at its heels.
Silver linings
Though issues could appear gloomy for Greggs, there are countervailing causes to be optimistic. Affected person traders should be rewarded given the board stays bullish that it might return to its earlier development trajectory in the long run, even when it takes just a few years.
Plus, there was a saving grace for traders who prioritise passive revenue. The group’s boosted its full-year dividend by 11% to 69p per share. Dividends are properly coated at two occasions anticipated earnings, offering shareholders with an honest margin of security.
From a valuation perspective, the Greggs share worth additionally seems to be extra enticing at present. The ahead price-to-earnings (P/E) ratio has decreased significantly relative to the inventory’s historic common. Buying and selling at a a number of of 13 occasions ahead earnings, there’s a reputable case to be made that the shares are low-cost at present.
Lastly, formidable long-term enlargement plans to function greater than 3,000 UK shops point out that there might nonetheless be room for additional development. In 2024, the enterprise celebrated opening its 2,600th store and it goals to ship 140 to 150 new shops this yr.
My take
I’ve been impressed with Greggs’ enterprise prior to now, however the newest outcomes have given me pause for thought. Though the inventory seems to be low-cost at present, I’m reluctant to speculate till I see concrete proof that the agency can return to its glory days. Total, I see higher funding alternatives elsewhere.
