It’s almost lunchtime and I fancy a trip to Greggs (LSE: GRG), but should I buy its shares as well? At today’s valuation, they’re certainly tempting.
Greggs has turned itself into a national treasure. Its blue and yellow frontage is a fixture on high streets, and increasingly in shopping centres, railway stations and airports too. For years, the share price was a treasure too. That’s no longer the case. It’s now fallen 40% over two years and 25% over the last 12 months.
Everything seemed to go right for Greggs for years as canny marketing campaigns hit the spot and its expansion powered on. Even the cost-of-living squeeze worked in its favour as customers traded down to affordable treats. Sales surged and confidence grew. When that growth began to cool in autumn 2024, market reaction was swift.
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Solid, steady profits aren’t enough on their own. Investors expect growth, and ideally growth that accelerates. Once momentum fades, doubts creep in.
Full-year 2024 was a record, with sales climbing 11.3% to just over £2bn. In 2025, revenue reached £2.15bn, but it grew just 6.8%. Much of the increase came from new openings rather than stronger trading at existing sites. Like-for-like sales in company-managed shops rose just 2.4%.
Expansion continued regardless. There were 121 net shop openings in the fourth quarter, taking the total estate to 2,739. Greggs still believes there’s scope for significantly more locations across the UK.
Valuation appeal
The share price appears to have stabilised, trading at similar levels to six months ago. On a price-to-earnings ratio of 10.5, it looks far better value than during its boom years. At the peak, the P/E reached 22 and the dividend yield shrank to around 2%. Today, the trailing yield stands at 4.35%.
That combination of a lower P/E and higher income is tempting. We appear close to deep value territory, with the shares back to levels seen eight years ago. But there’s a sticking point. Greggs doesn’t expect any profit growth in 2026. That’s not good.
Household finances remain stretched and wage growth is cooling, although falling inflation offers some relief. Supply and ingredient costs could ease, but higher employer National Insurance contributions and increases to the National Living Wage are pushing up staff bills and squeezing margins.
Investor appetite
There’s also the question of long-term saturation. The UK can only consume so many sausage rolls and steak bakes. Overseas expansion looks challenging given differing tastes and strong local competition. How to explain the vegan sausage roll to a Frenchman?
A newer concern is the rapid rise of weight-loss drugs such as Wegovy and Mounjaro. Around 1.6m Britons have tried them and 3.3m more have expressed interest. If these treatments materially curb appetites, demand for indulgent snacks could soften. Although people still need to eat something.
At today’s valuation, I think Greggs shares are worth considering with a long-term mindset. The next trading update, due on Tuesday (3 March), may help me decide whether to sink my own teeth into the stock. For now, buying it can wait. My lunch can’t.
