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Spare a thought for holders of Greggs (LSE: GRG) shares. The sausage roll seller’s value has tumbled almost 40% in 2025 alone. This leaves me questioning whether this once-adored FTSE 250 stock — and one that occupied a space in my own portfolio about a year ago — is now oversold.
Spoiler: I think it might be.
Feeling the heat
In its most recent update, the food-on-the-go retailer revealed that like-for-like sales in company-managed shops rose by 2.6% in the first half of its financial year. All told, total sales in the 26-week reporting period climbed 6.9% to push through the £1bn boundary.
However, there was a big ol’ catch: June’s hot weather led to lower footfall in the cities and towns in which Greggs operates. Throw in the impact of store refurbishments and the mid-cap firm said that full-year operating profit would now come in “modestly below” that achieved in 2024.
This was never going to go down well with a market whose faith in the company had already been rattled by softer trading earlier in the year.
Worse to come?
Since this hot spell looks set to continue, things could get worse for the Newcastle-based business. Sure, Greggs will continue to shift a lot of cold drinks. But a hot pasty while walking down a high street on a scorching-hot day? That’s a hard sell.
For me, this now makes the next set of interim results — due 29 July — essential reading. If there’s a whiff that profit will now come in ‘materially’ below current estimates, another leg down looks likely.
Even if this doesn’t happen, a worse-than-expected inflation read next week could be enough to upset a few more investors. At the beginning of the month, CEO Roisin Currie and her team reflected that its outlook on costs was “unchanged” and that “mitigation measures are expected to enhance second-half performance“. Might this prove optimistic?
Temporary troubles
Here’s the thing: this warm weather won’t last. And when the rain and cooler temperatures inevitably return, it’s surely a good bet to assume that shoppers, office workers and travellers will return.
It also seems likely that many food retailers are suffering in the current climate. Thanks to its low-priced treats, Greggs should be one of the more defensive of the lot.
Speaking of value, I can buy the stock today for the equivalent of 13 times forecast earnings. This looks cheap relative to the company’s average price-to-earnings (P/E) ratio of 28 over the last five years. Actually, that could prove to be a brilliant bargain if it can continue growing its store estate as planned. No less than 87 new shops opened their doors in the first half of 2025.
With the dividend yield currently standing at 3.9%, there’s a nice income stream too. Despite current woes, this should still be comfortably covered by profit.
Sitting patiently
When a well-run business suffers a substantial fall in popularity among investors, I’ll always take a look. My interest then grows if the problems look temporary.
Summing up, Greggs shares could have further to fall. But I also wonder if a lot of pain is now priced in.
I’ll wait for that next outlook statement before deciding whether to press the Buy button.
