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Greggs (LSE: GRG) shares are having an odd month. The share price was one of the FTSE 250‘s biggest losers on 8 January, falling 7% in a single day. This followed the company’s Q4 trading update with sales up yet again to over the £2bn mark.
The nation’s well-loved purveyor of steak bakes and vegan sausage rolls is still growing too. Around 120 new bakeries are set to open up and down the country in the year ahead. So what seems to be the problem? The answer could lie in a curious comment from the CEO about British eating habits.
Chief exec Roisin Currie described the changing tastes of Britons who frequent Greggs’ stores. The headline remark is that they’re plumping for “smaller portions” because of the effects of appetite-suppressing drugs.
The firm announced a shift in the type of foods purchased too. In came healthier options including higher protein and fibre foods. Out went its more traditional offerings like pasties and cakes.
It remains to be seen just how this will affect the company long-term. On the one hand, there are promising signs like a viral Tiktok campaign about selling boiled eggs in pots. Millions of views were racked up from a tagline of: “What weirdo buys boiled eggs from Greggs?”
On the other hand, a Greggs that sells smaller foods and fewer pasties does not sound like a recipe for success. Perhaps the most telling sign is that while growth is still happening, it’s slowing down. That trading update revealed that profit guidance for the year ahead was downgraded.
Value on offer?
Amid the uncertainty, one detail stands out to me: Greggs shares might be on sale. The share price is down 50% from a high in 2021. Is it time to follow that age-old investing mantra of ‘buy low, sell high’? Is this a chance to invest in the baker at half price?
The fall in value has turned it into a potential option for value hunters and dividend aficionados. The price-to-earnings ratio has dropped to 12. That’s well below historical values and the FTSE 250 average. It’s rare to see such a low P/E from a company that is still growing.
The dividend yield has jumped to over 4% too. That could mean returns above the current interest rate from dividends alone. Forecasts suggest these could increase up to the financial year of 2026 too.
All the signs seem to be point at a shift from Greggs – formerly one of the fastest-growing large UK businesses – into a mature company with little growth on the horizon. There are no guarantees either way, but this isn’t a stock I want to add to my portfolio at the moment.
