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While the broader FTSE 250 rose 8% in 2025, Greggs (LSE:GRG) shares slumped a whopping 40% in value. They crumbled as weaker consumer demand hit lower sales, denting its long-held reputation as a mighty growth share.
But is the battered baker now worth serious consideration as a recovery stock? Here are some of the key things investors must consider.
1. Tough conditions
Greggs has an excellent track record of outperforming the market. People love its sweet and savoury treats, and especially at its low price points.
The trouble is, very few retailers have thrived as shoppers have cut back. Not even Greggs. Like-for-like sales growth was just 2.9% in Q4 from own-managed stores. It was especially underwhelming given the soft trading numbers the year before.
So the question is: when can we expect consumers to properly loosen the pursestrings again? It might not be for some time, as the economy flatlines and cost-of-living crisis endures.
2. Growth options
That said, Greggs has a number of growth levers it’s pulling that could drive a sales (and share price) rebound, even if broader conditions remain weak.
On the product front, the firm’s doubling down on product innovation to attract people through its doors again. Encouragingly, this is an area where it has had considerable success (think steak bakes, vegan sausage rolls and other lunchtime staples).
It’s also increasing exposure to the lucrative evening period, and has further room to grow in delivery, backed by ongoing investments.
3. Past the peak?
Yet speculation that we’ve hit ‘Peak Greggs’ just won’t go away. The company would disagree, and expansion towards its 3,000 store target is continuing. However, the long-term outlook is less uncertain than it was a few years ago.
Other major players in the food-to-go market are also expanding (like KFC and Subway), threatening the baker’s potential recovery. There are also questions over whether the broader sector will suffer as weight loss drugs like Ozempic take off.
I’m optimistic Greggs’ product refreshments will help it tackle these dangers. But they still demand serious consideration.
4. Bargain basement
While Greggs faces clear dangers, there’s a good argument (in my view) that these are now more than baked into the share price. Could now be a great dip buying opportunity?
At £16.58 per share, the FTSE 250 firm trades on a forward price-to-earnings (P/E) ratio of 13.2 times. Meanwhile, its price-to-book (P/B) multiple is a shade below three.
To put that into context, its P/E and P/B ratios have averaged 22-23 times and six, respectively, over the last decade. This represents spectacular value, in my view, and suggests the company’s been way oversold.
The verdict on Greggs
It’s clear that Greggs has hit a significant roadbump over the last year or so. And conditions could remain difficult if consumer spending in the UK remains under the cosh.
However, its long-term growth outlook remains compelling, in my opinion. I don’t think this is reflected in its current valuation, and I believe it’s a great recovery stock to consider.
