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Despite the FTSE 250 hitting a 52-week high this week, not every stock on the index is winning.
And of those struggling, few are doing worse than popular high-street baker Greggs (LSE: GRG). The company’s shares are down a staggering 45% year-to-date, making it the second-worst performer on the UK’s mid-cap index.
I’ve held shares in Greggs for several years, but lately I’ve started to question that situation. Less than a year ago, the price came close to breaching its all-time high above £33.
Today, it trades near £15. If this slide continues, it won’t be long before it’s testing five-year lows.
So what’s going wrong with Britain’s most beloved sausage roll vendor? Following this morning’s half-year results, I decided to take a closer look.
Some bright spots, but not enough
For the 26 weeks to 29 June 2025, Greggs reported sales growth of 7%, which, in isolation, doesn’t seem too bad. Better still, the company maintained its interim dividend of 19p per share, underlining management’s confidence in the business.
However, under the surface, things look a bit less appetising.
Operating profit fell 7.1% to £70.4m, with earnings per share (EPS) sliding to 45.3p, down from 53.8p this time last year. The share price fell another 5% in early trading, extending an already brutal decline.
The group did open 31 new locations, bringing its UK estate to 2,649 shops. This shows that Greggs is still expanding, despite economic headwinds.
But investors are focused on the risks. Earlier this month, the company warned that full-year operating profit would likely fall short of 2024. Rising costs, store refurbishments and investment in cost-recovery programmes are all pressuring margins.
It must find a way to keep costs down while remaining competitive with other high street food vendors, or investor confidence will continue to slide.
Unseasonably hot weather may also have dented appetite for its usual bakery staples.
Add to that rising inflation, potential tax increases and UK consumers feeling squeezed — and it becomes easier to understand the share price collapse.
Still a fundamentally strong business
Despite the headwinds, Greggs doesn’t look broken. The stock now trades on a price-to-earnings (P/E) ratio of 10.5, and a price-to-sales (P/S) ratio of just 0.84. Both suggest the shares may be undervalued relative to historical levels.
Meanwhile, return on equity (ROE) remains excellent at 28%, and the company is still posting annual revenue growth of 11.3% and earnings growth of 7.4%.
These figures tell me that Greggs is still a high-quality business – it’s just enduring a difficult patch.
My verdict
Greggs remains profitable, well-loved, and committed to expansion. For long-term investors, the falling share price presents a tempting value opportunity that’s worth considering.
That said, I’m not planning to add to my position just yet. The short-term risks are very real, and it’s possible the share price could fall further.
But as someone investing with a 10-year+ horizon, I plan to hold. The core business is still a high street staple, and in my view, it still deserves consideration for a diversified FTSE 250 portfolio.
