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Three years ago, Greggs (LSE:GRG) shares were chugging along nicely. They had returned almost 70% over the prior five years, before dividends.
Even at the start of 2025, Greggs was doing well, trading at almost £28 per share. Then the share price collapsed 40% last year, leaving one Greggs share today costing less than £17.
So, anyone who invested five grand into the baked goods firm at the start of 2023 would now have just under £3,600. Dividends would have added about £500, lessening the blow slightly.
But rubbing salt into the wounds is the FTSE 250, the index to which Greggs belongs. Before dividends, that’s up almost 20% since January 2023, meaning the stock has badly underperformed over this period.
Slowing growth
The most obvious explanation for this poor showing is that the company’s like-for-like (LFL) sales growth has slowed dramatically. In the first nine months of 2025, this figure was just 2.2% versus 6.5% in the same period the year before.
The key LFL metric strips out the impact of new shop openings. It shows how much the business is growing (or not) within its existing footprint, rather than growth driven by simply opening more stores.
Total sales actually increased 6.7% in the first nine months of 2025.
Shop expansion doubts
The elephant in the room here then is cannibalisation. Greggs is investing heavily to beef up its supply chain to serve 3,500 shops (up from 2,675 in September).
However, the risk of cannibalisation, where a new shop simply takes customers away from an existing one nearby rather than creating new demand, becomes higher as you reach this level of ‘saturation’.
A sceptic may point to the widening gap between total sales and LFL sales as potential evidence that the brand is already reaching a saturation point. This point even has its own name — ‘peak Greggs’.
A data insight
Now, it’s important to state that weakening LFL sales growth at Greggs might simply be down to other things. Last year, management blamed a fragile economy and unfortunate weather (both heavy snow and extreme heat).
In its interim 2025 results, management also addressed the cannibalisation risk head-on: “As we grow the overall estate we monitor customer behaviour to ensure that new openings are not at risk of cannibalising existing shop sales. Analysis of our Greggs App customers shows that those who visit a new shop increase the overall frequency with which they visit Greggs, maintaining their visits to existing shops”.
The stock
The company is clearly going through a tricky patch, not helped by the ongoing cost-of-living crisis and higher staff costs.
Personally though, I think the longer-term growth story is still intact, supported by new supermarket locations opening in Tesco and Sainsbury’s, as well as its Bake at Home range expanding to Tesco stores as well as Iceland.
There are still hundreds of mid-sized train stations across the UK where Greggs doesn’t have a kiosk offering coffee, sandwiches, and more. It’s currently trialling a ‘Bitesize’ store format to capture this extra potential demand.
Meanwhile, the stock is trading at less than 12 times next year’s forecast earnings, while offering a well-supported 4.1% dividend yield.
For a company still boasting industry-leading margins, I think that’s good value, making Greggs a buying opportunity worth thinking about.
