Greggs (LSE: GRG) has delivered an 18% share price gain over the past year, drawing renewed attention from investors weighing whether to buy, hold, or sell.
Despite that recent strength, the five-year picture tells a more cautious story, with the stock down 33% while the FTSE 250 has edged up around 5% over the same period.
Over a decade, however, Greggs shares have more than doubled, reflecting the enduring appeal of its value-focused bakery business model across the United Kingdom.
A trading update this week showed 8% sales growth in the most recent quarter, supported by new shop openings and fresh menu additions like a steak and stilton cheese pastry.
Shareholder Christopher Ruane, who has written about his position in the stock, says he has already sold the majority of his Greggs shares in recent months to bank profits following the rally.
Ruane acknowledges he still believes in the long-term growth story but cites two specific concerns that pushed him toward trimming his position significantly.
The first concern is valuation, with the shares now trading at 16 times earnings, a level Ruane describes as no longer the bargain it once was after rising by a third in under three months.
The second concern is the pattern of unexpected costs, with last summer’s shock profit warning due to weather serving as a recent example of how quickly sentiment can shift.
This week, the company outlined increased costs expected from new distribution centres and the closure of some current factories, adding further short-to-medium-term pressure on profitability.
Beyond those structural changes, Greggs has faced rising National Insurance costs, ingredient inflation, and higher energy bills, all of which have acted as persistent drags on margin improvement.
In the first half of the current period, the pre-tax profit margin stood at 6.9%, compared to 6% a decade ago, despite revenue growing by 162% over that same timeframe.
That modest margin expansion, even amid dramatic revenue growth, raises questions about whether the business can fully capture the economies of scale its expansion would theoretically generate.
Ruane points to the labour-intensive nature of the operation and its exposure to external cost pressures as likely explanations for why margins have remained relatively constrained.
His broader concern is that each time Greggs appears poised to convert its strong brand, large customer base, and value proposition into shareholder returns, a new cost emerges to cap the upside.
For now, Ruane says he is holding onto a small remaining position while actively looking elsewhere in the market for what he considers more clearly valued opportunities.
