Greggs (LSE: GRG) shares would need to climb 21.4% from their current level on 19 June to return to their 52-week high of 1,982p.
The company’s valuation has taken a hit since early June 2025 and investors will be hoping to see the stock marching higher before year end. But why are the company’s shares under pressure and could we see them soar again?
Why the shares have fallen
The company’s valuation drop hasn’t been caused by any single factor. The full-year results released in March 2026 showed statutory pre-tax profit down sharply, driven by:
- Subdued UK consumer confidence weighing on footfall
- Rising input costs squeezing margins
- A shift towards smaller portions, partly linked to weight-loss medication use
- Heavy investment in new supply chain capacity ahead of any payoff
That combination turned a popular growth stock into one the market was nervous about, even as the underlying business kept expanding.
What progress has been made since?
The company has continued opening shops throughout the downturn, growing its estate past 2,750 locations.
More encouragingly, like-for-like sales growth accelerated to 3.3% in the 10 weeks to 9 May, up from 2.5% earlier in the year, helped by April’s launch of the Chicken Roll, which became a real customer favourite.
We made good progress in 2025, in a challenging year where subdued consumer confidence impacted the food-to-go market. We enter 2026 with a strong pipeline of new opportunities to make Greggs even more convenient for customers.
Roisin Currie, Chief Executive, Greggs
Crucially, the heavy capital spending behind the recent margin pressure is set to ease, falling from £287.5m in 2025 towards £200m this year and £150m-£170m from 2027. That should free up cash and support return on capital as new sites mature.
With a price-to-earnings (P/E) ratio of 13.7, the market still isn’t pricing in much recovery. However, that could mean there’s some further upside if Greggs can continue demonstrating strong sales momentum and consumer spending holds up.
I don’t think it’s out of the question for a leaner, stronger business model to see its valuation return to previous levels.
What are the risks?
Clearly, none of this potential valuation gain is guaranteed. A prolonged Middle East conflict could push input costs higher than the 3% currently assumed. Another factor is consumer confidence that could stay weak for longer and dampen sales growth.
I also think the company needs to successfully deliver its new Derby and Kettering facilities to demonstrate reducing capital expenditures and future capacity.
A [4.2]% dividend yield offers some cushion but I’m not sure it’s enough for investors to roll the dice without further evidence.
My verdict
In my view, closing the [21.2]% gap to the 52-week high isn’t unrealistic if management keeps executing it’s strategy. However, it relies heavily on consumer confidence improving and cost inflation staying under control.
I’d want to see another quarter of accelerating like-for-like growth before buying shares myself given other opportunities on my radar.
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Ken Hall does not hold any positions in the companies mentioned.
