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Greggs (LSE: GRG) shares are all the craze. We see this on the Idiot. Traders gobble up articles on the UK’s favorite bakery chain. Synthetic intelligence (AI) has evidently taken word of its reputation.
This morning, I requested the AI chatbot to call 2 FTSE 250 shares that look nicely positioned to surge in worth in 2025. Its first suggestion was fantasy video games producer Video games Workshop. Because the inventory entered the FTSE 100 in December, ChatGPT’s behind the occasions. As is usually the case, in my expertise.
Its second decide was good outdated Greggs. ChatGPT praised the group’s sturdy growth because it will increase retailer rely and spend money on on-line channels.
Is that this FTSE 250 inventory previous its finest?
There was no point out of the latest slowdown in gross sales, which made me cautious. Then I found that the reply to my query was lifted from an article written in September and lots’s modified since then.
Clearly, ChatGPT’s a pc programme quite than a inventory tipster. And to be honest it’s the primary to confess it. It’s enjoyable to play with however have to be handled with excessive warning. Proper now, I’d say the identical about investing in Greggs.
The shares had an excellent run, due to a witty advertising drive that neatly positioned its sausage rolls and different pastry-based produce as an affordable deal with in tough occasions. Naughty however good and nothing to be ashamed of.
As confidence grew, the board made formidable plans to spice up retailer rely from 2,500 to three,500, goal night openings, and pioneer shops in railway stations, retail parks, airports and the like.
Revenues rocketed from £811m in 2021 to £1.8bn in 2023. No marvel traders liked it. On 9 January, we realized they topped £2bn in 2024. However there was a catch.
Within the first half of final 12 months, whole like-for-like gross sales rose 13.8%. That slowed to 10.6% in Q3 and simply 7.7% in This autumn. Shoppers are struggling proper now, with the board blaming “more subdued high street footfall”.
Margins are being squeezed
As we all know, the UK economic system’s having a troublesome time. Development has just about flatlined because the election, and a recession’s attainable. Even Greggs will wrestle to develop given the gloomy outlook for the excessive road. Funds employer’s nationwide insurance coverage and minimal wage hikes will squeeze margis.
The board’s ploughing on, with a robust pipeline of latest store openings, whereas shuttering underperformers to maintain margins excessive. It’s additionally broadening its menu and enhancing digital capabilities, whereas engaged on its provide chain.
However analysts are forecasting gross sales development of simply 2.9% within the 12 months forward. If appropriate, that will mark an extra slowdown.
On the plus facet, the shares are cheaper. Final 12 months, that they had a price-to-earnings ratio of greater than 22. That’s now slipped under 17 occasions.
Some far-sighted traders would possibly contemplate this a chance to purchase Greggs shares, which can get well when the economic system does. I don’t suppose we’re there but and will likely be buying elsewhere for FTSE 250 bargains. No matter ChatGPT ‘thinks’.
