The first quarter of 2026 has been a bit lacklustre for Greggs (LSE:GRG) shares, turning a £5,000 investment at the start of the year into £4,612. But compared to their near-36% collapse across the first three months of 2025, this slight dip is likely a massive relief for many investors.
Some might even be hopeful that we’re approaching the bottom of this painful downturn before the momentum reverses and a recovery rally kicks off.
So, is this a fantasy? Or are Greggs shares really getting ready to bounce back? Let’s investigate.
The bull case for recovery
While Greggs continues to navigate through a challenging UK consumer spending environment, the underlying business has several catalysts that pave the way for a steady recovery.
In 2025, the group’s capital expenditures reached a massive £287.5m. But in 2026, that number is expected to fall to around £200m, before falling further in 2027, following the completion of recent logistics infrastructure upgrade projects.
Even if sales growth remains stuck in single-digit territory, the sharp drop in planned spending alongside the reaping of rewards from its previous efficiency and capacity improvements translates into a potential inflexion point for free cash flow.
This not only better positions the company to absorb further inflationary input costs but also supports a recovery of profit margins. In other words, even if the top line is flat, the bottom line might be on track to deliver rebounding growth by the end of 2026. And, in turn, open the door to a potentially powerful share price recovery.
That’s why the analyst teams at Berenberg, RBC Capital, UBS, Barclays, and even JP Morgan have just recently reiterated on their Buy recommendations with updated share price targets ranging from 1,830p all the way to 2,090p.
Compared to where the stock trades today, that’s a potential return of up to 35% – enough to turn £5,000 today into £6,757.
What could go wrong?
Internally, the stage appears set for a free cash flow and partial margin recovery in 2026. However, when looking at external factors, there remains a lot of uncertainty.
The biggest headwind facing this business is the UK consumer. In fact, management has already warned shareholders that weak consumer sentiment will “continue to be a headwind in 2026”. And that was before oil & gas prices started spiking following the conflict in the Middle East.
With British household budgets already coming under pressure from the latest round of tax hikes, the addition of further macroeconomic headwinds doesn’t bode well for discretionary spending. And the GfK Consumer Confidence index is already starting to reflect this, having ended March at its lowest point since April 2025.
Is now the time to buy?
The operating landscape for Greggs remains challenging in 2026. If consumer spending does slow as expected, the progress made in margins and free cash flow may ultimately be offset, leaving bullish investors disappointed.
As such, 2026 looks more likely to be a year of stabilisation rather than a full-blown recovery. So, for investors operating on a short time horizon, Britain’s favourite bakery chain likely isn’t a great fit. But for patient long-term investors looking to invest early into a recovery play, Greggs shares could be worth keeping a close eye on.
