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What a difficult five years Greggs (LSE: GRG) price. As we reached record highs at the end of 2021, this FTSE 250 the stock has crashed significantly since then. Meanwhile, the rest of London’s stock market is hitting new highs. So what went wrong for Greggs and its shareholders?
Greggs is doing well
Greggs the Baker was founded by John Gregg in Newcastle upon Tyne in 1939. After the first store opened in Gosforth in 1951, the bakery chain grew rapidly. Today, Greggs is one of the UK’s leading ‘food on the go’ chains with over 2,600 stores across the country. For example, although I live in a small town in Hampshire, there are three Greggs stores in my area.
Greggs sells a variety of nutritious meals (including the popular sausage rolls, steak bakes, and vegan sausage rolls), as well as sandwiches and hot and cold drinks. When I visit the UK, I often choose the fast, affordable, and fresh food offered at Gregs over its more expensive competitors. And as I’m from the North East myself, I’m happy to support this Geordie business.
Greggs shares floated on the London stock market in April 1984. Back then, the business had 260 stores and was worth £15m. At its peak, the share price reached 3,443p on 31 December 2021, valuing the business at around £3.5bn. In 2022, new manager Roisin Currie took over and, alas, it’s been downhill ever since.
Stocks are declining
As I write, the stock stands at 1,512.5p, valuing the group at just £1.5bn. This leaves the share price down a staggering 56.1% from its late 2021 peak. In fairness, the shares went into a dividend of 50p a share on Thursday, 30 April, which explains today’s price drop of 2.9%.
For the record, my family portfolio has Gregs stock, paying 1,696.7pa a share for our stake last July. Year to date, we are sitting on a paper loss of 10.9%, but this does not include dividends. And as shareholders, we will receive the above dividend of 50p-a-share on 29 May. Instead of using this money, we will use it to buy more Greggs shares. This increases our ownership and our future profitability.
As for Gregs problems, there are some uncontrollable issues. First, the cost of living problem keeps increasing the cost of inputs, which forces prices up. Second, the increasing use of GLP-1 dietary supplements reduces its sales. Third, higher employer National Insurance contributions reduce benefits. Fourth, extreme weather conditions became a problem in 2025.
A return play?
To me, Greggs shares look undervalued and unpopular today. The stock trades at 12.7 times trailing earnings, yielding close to 7.9%. Therefore, their dividend yield of approximately 4.6% per annum is covered 1.7 times by historical earnings.
Indeed, this FTSE 250 stock could turn into a price trap, rather than a rescue play. But I see the odds leaning towards the former – especially as the group’s ambitious store rollout continues and if/when sales growth strengthens. So, I’m happy to stay strong and wait for the next trading update on May 12th!
