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Pardon the pun, however Greggs (LSE:GRG) shares have taken an enormous chunk out of traders’ wealth in current occasions. The FTSE 250 inventory has crashed 50% since August 2024!
Nevertheless, if the promoting has now gone too far, this might doubtlessly create strong returns for long-term traders. So, is the inventory well worth the threat as we speak?
Cooling demand
As I see it, there are two huge issues negatively impacting Greggs, in addition to an rising potential menace. First, Chancellor Rachel Reeves turned up the warmth in late 2004 when she elevated the Nationwide Residing Wage and Employer Nationwide Insurance coverage.
Using greater than 32,000 individuals, Greggs was considerably impacted and subsequently hiked costs on some gadgets, together with sausage rolls. Elevating costs when many shoppers are already struggling financially is rarely supreme.
Second, the additional burden on employers has had a chilling impact on an already fragile financial system. The Nationwide Institute of Financial and Social Analysis is forecasting that unemployment will common 5.4% in 2026, up from 4.8% final yr.
Ben Caswell, an economist on the assume tank, stated: “A part of this unemployment story within the UK is rising labour prices.”
The rising potential menace I discussed is GLP-1 weight-loss medicine. Analysts at Jefferies say that weaker client spending and unfavourable climate can not alone clarify Greggs’ extended gross sales downturn, with GLP-1s possible a part of the image too.
As many as 1.7m individuals within the UK are taking these appetite-suppressing medicine as we speak, with hundreds of thousands extra contemplating them in future. Novo Nordisk has not too long ago had a day by day Wegovy capsule authorized within the US, which might see many individuals petrified of needles take into account the medicine.
Mark your calendars
All this has impacted Greggs’ numbers. Within the first half of 2024, whole gross sales rose 13.8%, with like-for-like gross sales in company-managed outlets up 7.4%. In the identical interval in 2025, these figures have been 7% and a couple of.6%, respectively. A large drop-off.
Shareholders will get Greggs’ preliminary outcomes for the 52 weeks to 27 December on 3 March. Metropolis analysts anticipate income to climb roughly 7% to £2.15bn, largely because of new store openings (round 120).
Nevertheless, money flows and earnings are anticipated to slide as Greggs invests closely in new distribution centres and absorbs increased prices. Due to this fact, shareholders ought to concentrate on administration’s steering for 2026 and any medium-term commentary.
This must be comparatively optimistic or else the inventory might stay within the doldrums for some time longer. Traders will wish to see proof that the brand new GLP-1-friendly menu is resonating with clients.
Is out-of-favour Greggs worthy of consideration?
Weighing issues up, I believe Greggs nonetheless has rather a lot going for it. The steadiness sheet, whereas briefly weakened because of progress initiatives, remains to be essentially wholesome. Administration expects a return to optimistic money technology in 2026 as capital expenditures peak.
Furthermore, the bakery chain remains to be rising whole and like-for-like gross sales, regardless of all of the challenges. And there’s a 4.4% dividend yield on provide for traders as they await a turnaround.
If an investor’s keen to look previous this rocky patch to the long run (our most popular funding horizon right here at The Motley Idiot), I believe the inventory might do properly. Greggs’ distinctive model, sturdy steadiness sheet, rising retailer rely, and low valuation make this one to contemplate.
