Expensive Greggs shareholders, mark your calendar for 3 March – Imperial Wire

Pardon the pun, however Greggs (LSE:GRG) shares have taken an enormous chew out of traders’ wealth in current instances. The FTSE 250 inventory has crashed 50% since August 2024!

Nevertheless, if the promoting has now gone too far, this might doubtlessly create stable returns for long-term traders. So, is the inventory definitely worth the danger as we speak?

Cooling demand

As I see it, there are two massive 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 excellent.

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 12 months.

Ben Caswell, an economist on the suppose tank, mentioned: “A part of this unemployment story within the UK is rising labour prices.”

The rising potential menace I discussed is GLP-1 weight-loss medication. Analysts at Jefferies say that weaker client spending and unfavourable climate can’t alone clarify Greggs’ extended gross sales downturn, with GLP-1s probably a part of the image too.

As many as 1.7m individuals within the UK are taking these appetite-suppressing medication as we speak, with tens of millions extra contemplating them in future. Novo Nordisk has just lately had a each day Wegovy capsule permitted within the US, which might see many individuals terrified of needles think about the treatment.

Mark your calendars

All this has impacted Greggs’ numbers. Within the first half of 2024, complete gross sales rose 13.8%, with like-for-like gross sales in company-managed retailers 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 on account 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 greater prices. Due to this fact, shareholders ought to give attention to administration’s steerage 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 need to see proof that the brand new GLP-1-friendly menu is resonating with prospects.

Is out-of-favour Greggs worthy of consideration?

Weighing issues up, I feel Greggs nonetheless has rather a lot going for it. The stability sheet, whereas briefly weakened on account of development initiatives, continues to be essentially wholesome. Administration expects a return to optimistic money era in 2026 as capital expenditures peak.

Furthermore, the bakery chain continues to be rising complete 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 feel the inventory might do effectively. Greggs’ distinctive model, sturdy stability sheet, rising retailer rely, and low valuation make this one to contemplate.