Greggs (LSE:GRG) shareholders haven’t had much to shout about recently. But things have just started to look up.
The company is finally showing signs of meaningful sales growth. And the stock is starting to bounce back as a result.
What’s been happening?
For any retailer, like-for-like (LFL) sales growth is a key metric. And with Greggs, things have been getting steadily worse since the end of the pandemic.
| Year | LFL sales growth |
|---|---|
| 2021 | 13.50% |
| 2022 | 17.80% |
| 2023 | 13.70% |
| 2024 | 5.50% |
| 2025 | 2.40% |
Realistically, nobody thought the firm was going to keep increasing revenues at 17.8% a year. But seeing growth slip to 2.4% is much more alarming.
In case anyone’s not sure, that’s why the stock has been falling. Worse yet, the company reported LFL sales growth of 1.6% in the first nine weeks of 2026.
The latest trading update, however, shows things starting to turn. Greggs reported at 2.5% increase in LFL sales in the first 19 weeks of 2026.
Better yet, growth reached 3.3% in the 10 weeks leading up to 12 May. And the share price has responded very positively to the recent update.
Don’t get carried away
LFL sales growth going from 1.6% to 3.3% is obviously a move in the right direction. But investors shouldn’t get carried away just yet.
Greggs is continuing to expect a 3% hit to margins from inflation this year. So that’s set to offset almost all of its higher sales.
That means things are still going to be tight. Subtracting the firm’s lease payments from its free cash flows doesn’t leave enough to cover the dividend.
Part of that is because Greggs is in an investment phase. The firm is investing in its production capacity and that takes cash.
If the company can get through the next 12 months or so, however, I think things should start to look brighter. And that’s worth keeping in mind.
The long-term view
Greggs reports its interim results in July. And investors will certainly be interested in what LFL sales growth looks like when the update arrives.
From a long-term perspective, however, the question isn’t where this metric will land in July. It’s what it will look like over the next few years.
Greggs has a strong reputation for customer value. That’s an important asset and its scale makes it hard for anyone else to imitate this.
I think this should act as a natural magnet for customers over the long term. But it’s fair to say that it hasn’t really done that recently.
Ultimately, the firm needs to find a way to stay ahead of inflation with its revenue growth. And that’s what investors need to weigh up.
Time for a comeback?
Greggs shares are almost 50% off their highs. But I’m not anticipating a full recovery to those levels any time soon.
A big reason for the decline is falling valuation multiples. The price-to-earnings (P/E) ratio the stock trades at has gone from 25 to 14.
My own view is that 14 is about right given the firm’s growth prospects. So I don’t expect things to revert back to where they were.
From a buying perspective, I’m not hugely excited. The stock doesn’t look like a terrible idea, but I can think of a lot that I like more.
