Greggs Shares Plunge 43%: What Led to This Dramatic Fall?

Greggs (LSE:GRG), the UK’s largest bakery chain, has witnessed a staggering decline in its share price, plummeting by over 43% since the start of 2025. Once a favored investment among British shareholders, the company now faces significant challenges that have contributed to this downturn.

Understanding the Decline

Several factors have converged to create a difficult environment for Greggs. Primarily, the company’s impressive growth trajectory, which had previously attracted investors willing to pay a premium, has come to a halt. After enjoying a strong track record of sales and profit expansion, the sudden stagnation in growth has caused concern among shareholders.

In April, the UK government’s Budget announcement led to an unexpected increase in staff salaries and National Insurance contributions. This additional financial pressure coincided with ongoing inflation in the costs of raw ingredients, further straining Greggs’ profitability. Management has attributed part of the decline to adverse weather conditions at the beginning of the year, which have persisted into the summer. However, some analysts question whether the company may have reached a saturation point in its market.

With growth slowing and profit margins under pressure, investor sentiment has soured. The stock’s premium valuation diminished as the market reevaluated its expectations, leading to the current share price turmoil.

Signs of Potential Recovery

Despite the prevailing pessimism, there are indications that Greggs may be on the path to recovery. The company’s price-to-earnings ratio currently hovers around 11, suggesting it is nearing value-stock territory. Recent results reveal a gradual sales recovery, with total sales increasing by 6.7% for the nine months ending in September. Inflation appears to be stabilizing, and recent investments in supply chain optimization could help improve margins moving forward.

Nevertheless, weak consumer spending in the UK continues to present challenges. Should economic conditions improve and concerns over market saturation prove unfounded, Greggs could see a significant rebound in its share price as investor confidence is restored.

Looking ahead, a new distribution center located in Derby is set to begin operations next year. This state-of-the-art facility is integral to management’s long-term strategy to expand their reach. However, any delays or disruptions related to this project could further dampen investor sentiment, particularly as competitors in the on-the-go food sector ramp up their own infrastructure investments.

Inflation remains a potential risk, as does any further deterioration in the UK’s economic environment. Both factors could hinder Greggs’ recovery even if weather conditions improve.

In summary, while Greggs’ shares currently remain out of favor, the company is showing early signs of recovery. For long-term investors, this situation may present a compelling buying opportunity if the stock price remains low while positive indicators begin to emerge. This has prompted some investors to add Greggs to their watchlists, alongside other promising FTSE 250 stocks.