Down 43%, Greggs is the worst-performing stock on the FTSE 250 this year. Can it recover?
The FTSE 250 is often home to the UKâs more domestically focused companies. Unlike the FTSE 100 giants with global reach, these mid-caps can be more vulnerable when the local economy slows. And few names are as tied to the fortunes of British high streets as Greggs (LSE: GRG).
This year, the nationâs favourite baker has endured a torrid time. A household brand famed for its sausage rolls, steak bakes, and vegan options, it has become the biggest loss-making share on the FTSE 250 in 2025.Â
Letâs take a look at what has gone wrong and whether the company can claw back some value for shareholders.
A brutal fall
So far this year, Greggs’ shares have dropped 43%. For the 26 weeks to 28 June, pretax profit slipped 14.3% to £63.5m, down from £74.1m a year earlier. Operating profit fell to £70.4m from £75.8m.
Interestingly, sales still rose past £1bn, up from £960.6m. But like-for-like growth slowed, and heavy investment in supply and manufacturing has squeezed margins.
Analysts Darren Shirley and Clive Black at Shore Capital have even questioned whether the chain has reached âpeak relevanceâ. That is a worrying thought for such an iconic high street presence.
Pushing forward
Greggs, however, is pressing ahead with expansion. In the first-half of the year, it opened 87 new shops while closing 56, resulting in 31 net additions. At the end of June, 2,649 shops were trading. Management still expects to open between 140 and 150 new shops in 2025.
âI completely do not believe weâve reached peak Greggsâ, CEO Roisin Currie insisted in an interview with Reuters. âThere are still significant parts of the UK where you cannot access a Greggs.â
That optimism is welcome, though challenges remain. Last month, the company warned that full-year profits could be âmodestly belowâ 2024 levels after sales were hit by Juneâs heatwave.
Financials look tempting
From a valuation perspective, Greggs now looks cheap. A forward price-to-earnings (P/E) ratio of 12.8 and a price-to-sales (P/S) ratio of 0.77 suggest the market may be underestimating the business.
The balance sheet is healthy enough, with a debt-to-equity (D/E) ratio of 0.79 â although a quick ratio of 0.3 highlights potential liquidity pressure if conditions worsen.
Perhaps most appealing is the dividend yield, currently sitting at 4.4%. With a payout ratio of 48.5%, the income looks sustainable for now. For income investors, that is a tasty prospect.
Risks ahead
Greggsâ traditional model of selling indulgent baked goods may be losing steam. The firm has worked to diversify into healthier sandwiches and salads, but rivals such as Sainsburyâs and Tesco already dominate that space at lower prices. If customers fall out of love with sausage rolls, the dividend alone wonât save the company.
In my opinion, Greggs looks attractively undervalued at todayâs price. And with both income and recovery potential, itâs a stock worth considering, in my book. But the risk is clear: if the chain cannot adapt to shifting tastes, it could face a long slide towards irrelevance.
Personally, I would hate to see this British institution disappear from the high street, so I really hope itâs got a few more tricks up its sleeve.
The post Down 43%, Greggs is the worst-performing stock on the FTSE 250 this year. Can it recover? appeared first on The Motley Fool UK.
Should you invest £1,000 in Rolls Royce right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Rolls Royce made the list?
More reading
- Forecast: hereâs what £5,000 invested in Greggs shares could be worth next year
- Start buying shares for £80 a month? Hereâs how!
- Down 27% or more, I think these FTSE 250 shares are brilliant bargains!
- Hereâs what £1k invested in Greggs shares a month ago is worth now
- Prediction: here’s what I think a £10,000 investment in Greggs shares may be worth in 2030
Mark Hartley has positions in Greggs Plc and Tesco Plc. The Motley Fool UK has recommended Greggs Plc, J Sainsbury Plc, and Tesco Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
