Greggs (LSE: GRG) shares have gone from red hot to ice cold in the last couple of years. Are they about to turn the temperature back up?
Investors really got behind the Newcastle bakery chain as it transformed itself from a tired high street staple into a national food-on-the-go giant.
Sales boomed. Stores spread relentlessly from high streets to railway stations and airports. Cult products such as the vegan sausage roll grabbed headlines, while profits climbed relentlessly. At one point, Greggs traded on a chunky price-to-earnings ratio above 23, while the yield sank close to 2% as investors chased growth. Then reality began to bite.
What changed for this retail darling?
Greggs was always a cheap treat but as the cost-of-living crisis intensified, its rampant sales and share price growth slowed. At the same time, rising inflation pushed up costs. Energy bills climbed, the minimum wage rose, and employer’s National Insurance hikes further squeezed margins. Also, I can’t have been the only investor questioning whether Greggs had simply expanded too far, too fast.
Full-year 2025 results showed sales rose 6.8% to £2.2bn, helped by 121 net new stores. But like-for-like sales rose a more modest 2.4%. Free cash flow dropped from £104m to £75m. Net cash also fell, from £125m in 2024 to £46m in 2025, following heavy spending on store expansions and supply chain infrastructure. The board froze the dividend at 69p after years of growth. Underlying pre-tax operating profits have gone into retreat:
- 2025 – £187.5m
- 2024 – £195.3m
- 2023 – £171.7m
- 2022 – £154.4m
- 2021 – £153.8m
However, sentiment picked up after Greggs issued a solid trading update on 12 May. Sales climbed 7.5% to almost £800m, although like-for-like sales picked up only marginally to 2.5%. Management also held full-year guidance and said underlying operating profit should broadly match last year’s £188m.
Can this FTSE 250 stock’s recovery gather pace?
Greggs shares jumped on the day and now trade almost 14% higher over one month. That’s despite dipping in the last week as wider market nerves returned. They’re down 18% over 12 months. So there’s still a buying opportunity here.
The shares look far less frothy than before. The price-to-earnings ratio has dropped to 13.9 while the trailing dividend yield has climbed to 4.17%.
Greggs still has ambition. It’s rolling out new stores at pace, stretching opening hours, adapting menus, and growing through franchise partnerships, which reduce operating costs. Management also locked in roughly 85% of energy costs for this year, which offers some protection if oil prices remain high.
However, Greggs still relies heavily on Brits having spare cash for affordable treats, and the economy looks weak, inflation is squeezing incomes, and unemployment keeps rising. The shares may still pick up, but I can’t see them generating the same bewildering excitement they did before.
I’ve watched this stock for years and at today’s valuation it’s far more tempting than it has been for some time. Yet I still can’t bring myself to buy it for my own portfolio. I just feel there must come a point when Britain hits peak Greggs.
Should you invest £5,000 in Greggs Plc right now?
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Harvey Jones does not hold any positions in the companies mentioned.
