Greggs (LSE:GRG) shares are down 8% this morning (4 March) as the FTSE 250 firm released its results for 2024. And I think there’s plenty for investors to be concerned about.
A lot of the information had already been released in the update from 9 January. But that hasn’t stopped the share price from dropping further in the wake of the announcement.
What we already knew: slowing growth
Investors already knew 2024 had been challenging for Greggs. Sales growth came in at 11.3%, with like-for-like sales up 5.5%, but this was well short of the 19.6% and 13.7% of 2023.
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On top of this, the company increased its store count by 226 units and it intends to keep opening stores in 2025. Again, however the rate of growth is expected to be slower.
In 2024, Greggs expanded its store count by just under 10%. The forecast for 2025, however, is for an increase of between 5% and 6%.
Slowing growth in 2024 was already known about before the latest update. But the outlook for 2025 in terms of trading conditions also looks relatively weak.
What we’ve found out: more challenges
Management reported that like-for-like sales have increased 1.9% during the first nine weeks of 2025. That’s below the rate of inflation and – I think – the biggest concern for the company.
Roisin Currie – the firm’s Chief Executive – stated that the current environment is tough. As well as consumers dealing with cost-of-living pressures, Greggs is facing higher staffing costs.
In order to protect its reputation as offering good value to customers, the business is attempting to avoid increasing prices. But that creates pressure on margins.
There was, however, some positive news for income investors. In line with its earnings growth in 2024, the firm increased its dividend to 69p for the full year.
Analysis
Greggs shares have been falling since the start of 2025 and it’s not hard to see why. At the start of the year, the stock was priced for growth that hasn’t really materialised.
I suspect sales have been less resistant to inflationary pressure than some investors might have hoped. In real terms, they’ve been negative since the start of 2025.
In the short term, the company might be able to keep moving forward by opening more stores. But it won’t be able to do this indefinitely and the expansion rate is slowing.
At some point, the stock could get to a level where it’s good value despite the limited growth. Investors need to decide for themselves where that is – I don’t think it’s here.
Foolish takeaways
Trading conditions are tough for Greggs, but I think there’s reason for optimism. It’s a tough environment for the industry as a whole and the company is the best at what it does.
I expect things to pick up for the business when the economic environment starts to improve. But that doesn’t look imminent, so I’m not in a rush to buy the stock right now. I don’t think investors should rush to consider it today either.
