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The Greggs (LSE: GRG) share price was red hot for a while, attracting a huge amount of attention for a supposedly humdrum high street chain.
The FTSE 250 stock’s success was driven by the board’s rapid growth strategy, which capitalised on a brilliant marketing push that radically transformed the company’s reputation in a way that’s actually pretty rare.
People went from sneering at Greggs to cheering it, thanks to the cheeky marketing masterstroke of the vegan sausage roll and other successful ventures.
Yet I looked at the stock several times last year and began to think it looked a little overdone.
Growth slows
While the growth was still coming and store expansion impressive, it was trading at a price-to-earnings ratio of more than 22. That looked steep for a company that, ultimately, is a purveyor of cheap, fatty treats on otherwise struggling high streets.
Sales started to dip as shoppers wilted in the cost-of-living crisis. The first warning came on 1 October, when Greggs reported a slowdown in Q3 sales.
While total sales rose 10.6% in the 13 weeks to 28 September, that was down from 13.8% in the first half. Like-for-like sales growth slipped from 7.4% to 5%.
In January, the board reported that total sales had broken £2bn for the first time, up 11.3% year on year. But again, growth had eased off. Like-for-like Q4 sales rose just 2.5%, down from 5.5% for the year overall.
Interim results on 4 March added to the gloom. Sales in company-managed shops rose just 1.7% in the first nine weeks of 2025, which the board pinned on January weather. Even the British climate seems to be against Greggs these days.
This stock has cooled
All this has taken a toll. The Greggs share price is now down 33% over the past year. That’s a blow for those who bought into the growth story late.
However, the valuation has reset. The P/E is down to around 12, which feels a lot more like it. There’s now a decent dividend, with a trailing yield of 3.83%. Suddenly, these numbers make it look worth buying again.
Risks remain. Consumers are still feeling the pinch and 2025 is shaping up to be a challenging year. Still, broker forecasts are starting to look more tempting.
Twelve analysts covering the stock have issued a median target of 2,316p over the next 12 months. That’s up more than 28% from today’s 1,803p. Add in the yield and investors could see a total return of around 32%, which would turn a £10,000 investment into £13,200, if correct.
Worth considering
However, some of those forecasts may not reflect recent weakness. And Greggs hasn’t exactly bounced in the market rally of the last week or two, suggesting the issues here are specific to the stock, not general.
The UK economy now looks as sticky as a sticky bun on a stick, so I’m not expecting a lightning-fast recovery in sales.
Thanks to the dividend, Greggs shares may now be worth considering with a long-term view. They’re certainly more appealing than when I looked at them last year. But investors may have to chew through a bit more gristle before they get to the tasty bits.
