Shares in Greggs (LSE:GRG) are down 11% on Thursday (9 January) after the corporate’s This fall buying and selling replace. And searching on the report, I don’t assume it’s onerous to see why.

General, revenues elevated by just below 8%, with round 2.5% coming from like-for-like gross sales progress. That’st robust, however is the large drop within the inventory the shopping for alternative I’ve been ready for?

Gross sales progress

Whereas 8% progress might sound fairly good, context is all the things in relation to the inventory market. It means the agency’s price of gross sales progress has been slowing constantly since 2021.

Greggs income progress 2015-24

Created at TradingView

Moreover, Greggs is a progress inventory – and is priced like one. At first of the week, it was buying and selling at a price-to-earnings (P/E) a number of of 21, which signifies traders expect strong progress forward.

Greggs P/E ratio 2024-24 

Created at TradingView

On prime of this, like-for-like gross sales rising by 2.5% is a barely worrying signal. It implies that the remainder of the rise has come from Greggs opening extra shops, which it received’t be capable of do indefinitely.

When the agency reaches its eventual capability by way of shops, the one means it is going to be in a position to continue to grow might be like-for-like gross sales. And the latest replace coming in under inflation is a priority.

Outlook

The outlook for 2025’s additionally pretty underwhelming. Greggs is anticipating to open between 140 and 150 new shops this yr, in addition to relocating 50 of its current shops.

Once more, context is vital. The corporate at the moment has 2,618 venues, which means the anticipated new openings will solely enhance the prevailing retailer depend by round 5.5%.

Which means like-for-like revenues are going to have to choose up with a view to generate vital gross sales progress. Given the difficulties within the final quarter, I’m not shocked to see the share price falling. 

Is that this my alternative?

From an funding perspective, I believe there’s lots to love about Greggs as a inventory. Regardless of weak This fall gross sales, its enterprise mannequin of offering low-cost meals to folks is one I believe’s going to show sturdy.

Over the long run I count on this to even be comparatively resilient in troublesome financial environments. And the agency has a really robust steadiness sheet with £125m in internet money, which ought to add to its resiliency.

The large query in my thoughts is what price I’m prepared to purchase it at – and that comes down to its future progress prospects. The corporate’s aiming for 3,000 shops, nevertheless it’s quickly closing in on that stage.

That doesn’t go away quite a lot of room for additional progress, particularly if same-store gross sales don’t do way more than offset the consequences of inflation. And that’s why I’m not dashing to purchase the inventory proper now.

It’s getting shut

Even after the most recent decline, the Greggs share price continues to be round 10% increased than the place I’d like to purchase it. However given the strain UK shares have been underneath, it’d effectively get to this stage.

Given the aggressive pricing of its merchandise, I believe overpaying for Greggs shares can be an ironic mistake. So I’m trying to be affected person with this one – however I hope for a shopping for alternative.