A while back, I owned Greggs (LSE:GRG) shares in my ISA portfolio. I was a big fan of the brand and would often pop into my local Greggs for a coffee and a salad box, then somehow walk out with a corned beef pasty and a jam doughnut. Don’t judge, please (I’m Northern).

The baker’s share price powered higher in the FTSE 250 for many years as Greggs shops sprang up in airports, retail parks, train stations and motorway service stations. Anywhere people were on the move, basically.

From the start of 2010 to August 2024, the share price increased almost 700%. Income also flowed to shareholders, with special dividends on top of the ordinary payouts becoming the norm.

Management trumpeted plans to expand to 3,000+ shops across the UK, up from less than 1,500 at the end of 2010. Everything was going great guns.

Then this happened…

Quite quickly last year,things began to change, and this is the period when I started to have doubts about the investment. In October 2024, new Chancellor Rachel Reeves announced a rise in employer’s National Insurance contributions. For Greggs, which has more locations than McDonald’s and employs around 32,000 people, this would cost it tens of millions extra every year.

Okay, I thought, not great. But the company has pricing power and can offset some of that by adding a few pennies onto its food. CEO Roisin Currie remained bullish at the time, saying: “Our shop growth plan, our supply chain investment, none of that changes. We are still absolutely going for growth“.

Reeves said it was “a once-in-a-parliament budget to wipe the slate clean“, putting the public finances “back on a firm footing“. However, I became convinced that taxing businesses heavily to fund higher public spending would not lead to economic growth. Quite the opposite.

I feared job losses would follow, with the knock-on effect of less foot traffic for retailers. With Greggs shares still carrying a growth premium at the start of 2025, I decided to exit my position.

That was a lucky escape because the share price has crashed 40% since!

Slowing growth

Greggs has indeed experienced slowing growth amid a deteriorating market backdrop. In October, it reported a 6.1% rise in Q3 sales, but like-for-like sales were only up 1.5%. 

That was a massive deceleration from previous years, and full-year operating profit is set to be slightly below last year’s £195m.

Meanwhile, the public finances are not on a firm footing. Far from it. In fact, Reeves might even be set to introduce more tax rises later this month in the Autumn Budget. This risks heaping more pressure on a fragile economy (UK unemployment has just hit a four-year high).

Revisiting the stock

Clearly then, there are big dark clouds hanging over Greggs stock right now. But it does look like the pessimism might have gone too far. The forward price-to-earnings ratio is now just 12, while there’s a well-covered 4.4% dividend yield on offer.

That looks good value for a well-entrenched brand with solid profit margins (by industry standards). The shop growth plan still exists.

For patient investors willing to take a longer-term view, I think Greggs stock deserves closer attention. It might serve up market-beating returns from today’s price of 1,553p.