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The past year has been a catastrophic period for Greggs‘ (LSE:GRG) share price. Down more than 40%, the baker’s slumped as enduring pressure on consumers’ wallets — and more recently warm weather — have hit sales of its sausage rolls, pasties and sweet treats.
Greggs’ fresh update today (1 October) revealed more of the same generally speaking, with like-for-like sales growing just 1.5% in the 13 weeks to 27 September. Turnover was up 2.2% in the year to date, revealing that, for now at least, the breakneck sales growth it previously enjoyed remains elusive.
Yet investors met Greggs’ update with some enthusiasm, sending its shares 8% higher on Tuesday to £17.30. While risks remain, could the FTSE 250 company be on the first step of a glorious comeback?
Crumbs of comfort
As I’ve said, those third-quarter numbers weren’t anything to get especially excited about. However, it seems the market feared results could have been much, much worse following recent profit warnings.
In this context, news that Greggs was sticking to its full-year guidance was enough to give the share price a healthy boost.
Total sales were up 6.1% last quarter, the baker said. But as those weak like-for-like numbers indicate, this was chiefly thanks to new store openings in the period.
In the year to date, sales were up 6.7%, driven by the opening of 130 new stores (there were 57 new shops including closures and relocations).
Yet that largely uninspiring update did provide some crumbs for investors to savour. Greggs said it had enjoyed “improved trading in August and September following heat-affected July,” and that “operational costs have been well managed and the outlook for cost inflation in 2025 is marginally improved“.
What next for Greggs?
Consumers continue to feel the pinch in the UK as the economy basically flatlines. And with inflation ticking higher again, conditions are likely to remain tough for the retailer.
Having said that, I’m quietly confident Greggs’ share price may have found a floor following its year-long collapse.
Analyst Matt Britzman notes that “the steady ship has been rocked this year, and its outlook has shifted to a slow rise rather than a rapid bake“. Accordingly, its forward price-to-earnings (P/E) ratio now sits at a far more reasonable 13.9 times versus roughly 21 times last October. It’s the sort of re-rating I think could spark strong interest from long-term investors.
I own Greggs shares in my own portfolio. And despite threats like rising competition, I’m hopeful the company’s sales will pick up strongly over time as store numbers grow and supply chain upgrades kick in. It can also lean heavily into the supermarket and delivery channels and evening trading to grow sales.
With Wednesday’s update revealing first signs of a potential turnaround, some City analysts believe Greggs’ earnings could start growing again from 2026. I think now’s a good time to give the FTSE 250 company a close look again.
