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Spare a thought for holders of Greggs (LSE: GRG) shares. The sausage roll vendor’s worth has tumbled nearly 40% in 2025 alone. This leaves me questioning whether or not this once-adored FTSE 250 inventory — and one which occupied an area in my very own portfolio a few yr in the past — is now oversold.
Spoiler: I believe it may be.
Feeling the warmth
In its most up-to-date replace, the food-on-the-go retailer revealed that like-for-like gross sales in company-managed outlets rose by 2.6% within the first half of its monetary yr. All informed, complete gross sales within the 26-week reporting interval climbed 6.9% to push by means of the £1bn boundary.
Nonetheless, there was a giant ol’ catch: June’s sizzling climate led to decrease footfall within the cities and cities wherein Greggs operates. Throw within the affect of retailer refurbishments and the mid-cap agency mentioned that full-year working revenue would now are available “modestly beneath” that achieved in 2024.
This was by no means going to go down effectively with a market whose religion within the firm had already been rattled by softer buying and selling earlier within the yr.
Worse to return?
Since this sizzling spell appears to be like set to proceed, issues might worsen for the Newcastle-based enterprise. Positive, Greggs will proceed to shift a whole lot of chilly drinks. However a sizzling pasty whereas strolling down a excessive avenue on a scorching-hot day? That’s a tough promote.
For me, this now makes the subsequent set of interim outcomes — due 29 July — important studying. If there’s a whiff that revenue will now are available ‘materially’ beneath present estimates, one other leg down appears to be like probably.
Even when this doesn’t occur, a worse-than-expected inflation learn subsequent week could possibly be sufficient to upset a number of extra traders. At the start of the month, CEO Roisin Currie and her staff mirrored that its outlook on prices was “unchanged” and that “mitigation measures are anticipated to boost second-half efficiency“. Would possibly this show optimistic?
Momentary troubles
Right here’s the factor: this heat climate gained’t final. And when the rain and cooler temperatures inevitably return, it’s certainly wager to imagine that consumers, workplace staff and travellers will return.
It additionally appears probably that many meals retailers are struggling within the present local weather. Due to its low-priced treats, Greggs must be one of many extra defensive of the lot.
Talking of worth, I should purchase the inventory immediately for the equal of 13 instances forecast earnings. This appears to be like low cost relative to the corporate’s common price-to-earnings (P/E) ratio of 28 over the past 5 years. Really, that would show to be a superb cut price if it may possibly proceed rising its retailer property as deliberate. A minimum of 87 new outlets opened their doorways within the first half of 2025.
With the dividend yield at present standing at 3.9%, there’s a pleasant revenue stream too. Regardless of present woes, this could nonetheless be comfortably coated by revenue.
Sitting patiently
When a well-run enterprise suffers a considerable fall in recognition amongst traders, I’ll at all times have a look. My curiosity then grows if the issues look momentary.
Summing up, Greggs shares might have additional to fall. However I additionally surprise if a whole lot of ache is now priced in.
I’ll await that subsequent outlook assertion earlier than deciding whether or not to press the Purchase button.
