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Greggs (LSE: GRG) shares have displayed incredible volatility in recent months. They started the year by falling off a cliff, shedding a quarter of their value in just three days. Then they slipped a bit more before jumping almost 30% between early April and mid-May.
In recent days, Greggs stock has been sliding again. Indeed, it slumped 13% Wednesday (2 July), taking the one-month decline to 15.6%.
So anyone who invested £5,000 in the FTSE 250 bakery chain just over four weeks ago would currently have £4,220 to show for it. Not a great start.
Profit warning
The culprit for yesterday’s slump was a trading update delivered by the sausage roll supremo. In this, it said like-for-like sales in company-managed shops increased by 2.6% in the first half of 2025. This was down from 7% in the same period last year.
Total first-half sales did rise 6.9% to just over £1bn, as Greggs opened 31 net new shops. There are now 2,649 trading, comprising 2,085 company-managed locations and 564 franchised units. Management says it’s still on track for 40-150 net openings for the full year.
Much like the share price, business has been volatile this year. Things started off slowly, with “challenging weather conditions” in January, followed by an improvement in February. Then trading was good into May, but June’s heatwave saw less demand for most things except cold drinks.
As a result, the company warned that “full year operating profit could be modestly below that achieved in 2024”. This comment almost certainly sparked the sell-off in the shares yesterday.
More extreme weather
What to make of this? Well, June was certainly a hot one. The Met Office says it was the warmest on record, beating even the heatwave of 1976. And it says it’s “virtually certain” these high temperatures are being caused by global warning, implying this could become the norm.
Will Greggs keep seeing these extreme dips in demand for hot pastries whenever summer rolls around? Perhaps, though warmer winters might offset this.
Either way, one thing Greggs is adept at is menu innovation. In other words, offering different food and drinks. Maybe it could start selling ice cream to complement its smoothies. Sausage roll Sundae, anyone?
On one of the cooler days in June, I visited my local Greggs and saw customers buying a wide range of food (sandwiches and cold drinks, coffees, salads, etc). Not just baked and sweet goods, as is often portrayed.
Greggs looks cheap
I sold my Greggs shares earlier this year because I thought the medium-term growth outlook was deteriorating. Consumers are under pressure, while Greggs has been forced to put up prices to offset the tax increases imposed in April.
I suspect more tax rises are coming next year, despite what the government says. If so, that’s hardly likely to turn investors bullish on UK retailers.
Weighing things up, I think there are more attractive stocks for my own portfolio. Having said that, this latest sell-off looks overblown to me.
Based on current forecasts for 2026, which admittedly might now be revised downwards slightly, the stock’s trading at just 12 times forward earnings. There’s also a forecast 4% dividend yield.
Investors might want to take a look at Greggs around 1,700p.
