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I Greggs (LSE: GRG) share price was already in trouble before the Iran war sent investors into a panic. After a brilliant run, when the FTSE 250 The bakery chain can’t be wrong, its sales, profit and share performance all started to cool in late 2024.
The Middle East worries tensions are making a bad situation worse by driving up inflation and leaving consumers feeling even poorer. Investors who expected Greggs shares to outperform may be in for a surprise. They were actually up 5.8% last week. Only six FTSE 250 stocks did better. What’s going on?
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While investors are preoccupied with geopolitical events, individual company news can still drive stock prices. Last Tuesday (3 March), Greggs reported that total sales rose by 6.8% to £2.2bn in the year to 27 December while like-for-like sales at company-owned stores rose by 2.4%.
Chief executive Roisin Currie recommended a “enduring” performance, indicating market share growth and ongoing strategic progress. That may explain why shares are flat. However, these were not exactly good results.
Underlying pre-tax profit fell 9.4% to £172m, hit by volume pressure and rising fixed costs tied to manufacturing, transport and technical capacity.
Greggs was also adamant about the idea. It expects market conditions to “stay challenged” this year. I don’t think anyone can argue with that right now.
Greggs insists a strong value proposition should support sales, but the new financial year looks slow, even before Iran. In these difficult times even a cheeky trip to Greggs is starting to feel like a luxury for many.
The group took public sentiment by surprise over the years, but Dan Coatsworth, head of marketing at AJ Bell, has highlighted “to hear that your proposal is expiring”despite the fact that the company is constantly updating its menu.
Growth, value and revenue
I see his point. I’m not a natural Gregs customer but have popped in for the odd sausage roll or steak bake over the years. Lately though, I haven’t liked it that much. Greggs admits that food preferences are changing. Consumers are increasingly looking for more protein, more fiber and smaller portions. The growing popularity of weight loss drugs can also have an impact.
When I last checked Greggs shares on March 1, the price-to-earnings ratio looked very tempting at 10.5. That was less than half the rate seen during the boom years. Nine days later, it rose to around 13.85.
The change may reflect weak gains and recent increases in share prices. It’s a decent value today, but not dirt cheap. The trailing dividend yield fell slightly to 4.2%, although that still looks pretty good for investors.
Still, I’m not too happy with those results, and I wonder if Gregs time has passed. Die-hard fans might consider buying its shares today, but I see a lot FTSE 100 and FTSE 250 shares that look very tempting in the current volatility.
