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As years go, 2025 will surely go down as one that owners of Greggs (LSE: GRG) shares will want to forget. The stock’s lost height again today, following the release of half-year numbers.
Look out below!
Total sales rose 7% in the 26 weeks to 28 June. While this may look pretty reasonable, the trading period was affected by lower footfall in areas where the company operates. Quite a lot of that was down to the seriously hot weather seen across the UK in June. Costs also played a role.
Collectively, these variables pushed pre-tax profit down 14.3% to £63.5m.
Acknowledging that Greggs had faced a “challenging start to 2025“, CEO Roisin Currie did her best to put a positive spin on things. In addition to sticking to the full-year guidance given at the start of July, there was lots of emphasis on how much progress had been made in improving its supply chain infrastructure. This includes a new frozen manufacturing and logistics site in Derby and a new National Distribution Centre in Kettering.
Even so, the Greggs share price is down by 5% in early trading, suggesting investors are still nervous. All told, this means the stock’s tumbled nearly 50% in one year!
There might be more pain to come
I understand the pessimism surrounding the £1.7bn-cap. The continuation of the hot weather into July could mean that the next update – due around the start of October – fails to show an improvement in trading.
There’s also the question of just how far this company can keep growing until it reaches saturation point.
For its part, Greggs sees a “clear opportunity for significantly more than 3,000 UK shops“. That may prove overly ambitious, even though it’s been making strides to expand beyond the high street into previously untapped locations.
Already priced in?
Then again, many of the current headwinds are arguably priced in. Before markets opened this morning, the shares changed hands at a price-to-earnings (P/E) ratio of 13. That’s pretty average for a UK stock but it’s significantly cheaper compared to the sort of valuation Greggs commanded one year ago.
And although I tend not to like a company attributing a fall in profits to good/bad weather, I’m willing to make an exception here. However much consumers enjoy tucking into a hot pasty, these aren’t ever going to sell well in a heatwave.
There’s also the dividend stream to compensate bruised-but-patient owners. Even though the interim payout was understandably maintained at 19p per share, analysts still have the stock yielding around 4%. This income’s likely to be easily covered by expected profit.
Getting ready to buy
As someone who’s been looking to buy back into this company (I sold my position around this time in 2024), I’ve been watching the Greggs share price closely.
Given today’s reaction, I’m not inclined to say that we’ve seen an end to its woes. However, we’re surely getting to a point where the market begins to sniff value. None of its current problems look permanent, after all.
I’m keeping the business on my watchlist for now. But my finger’s beginning to hover over the buy button.
