GreggsThe company’s (LSE: GRG) stock has had a rocky start to the year. Markets have punished Britain’s favorite bakery chain after it reported a keen slowdown in sales. This is a blow to investors who have sunk their teeth into the market FTSE 250 waiting for a tasty treat.

Greggs has transformed itself into a national treasure thanks to clever marketing and a carefully executed expansion strategy.

It seemed unstoppable, with plans to expand its fleet of 2,500 stores to 3,500 while targeting up-to-date locations including train stations, airports, supermarkets and retail parks. Greggs is also testing evening openings and improving delivery services, which could enhance revenue per store and overall profitability.

The FTSE 250 star will struggle in 2025

The producer of rolls and sandwiches enjoys forceful brand recognition, customer loyalty and consistent sales. In 2021, revenues were £1.23 billion. Last year they exceeded £2 billion and management plans to reach £2.44 billion by 2026.

Greggs has another advantage. It has its own production and distribution channels. This helps alleviate supply chain issues, ensure quality control and enhance margins. Investors bought into the growth story, maybe a little too much. Eventually, Greggs shares became costly.

The company’s shares traded at around 23 times earnings last year, well above the FTSE 250 average of 15 times. And that’s the main reason I didn’t buy them.

I’m lucky. The quotations update from October last year (October 1) highlighted the slowdown in sales in the third quarter. The January 9 update brought more bad news. Fourth-quarter comparable sales growth at company-operated stores slowed to 2.5%, down from 5% in the prior quarter. The board cited “subdued traffic on main streets”.

The autumn budget, which increased both employer national insurance contributions and the minimum wage, could add £45m to Greggs’ costs this year. In 2026, this amount will enhance to £50 million.

The stock is starting to look like a decent value again

Worse still, the economy is slowing and inflation is rising. This will reduce disposable income, raise costs and put Greggs’ reputation for value at stake.

These pressures have impacted the Greggs share price, which has fallen 27% since the beginning of the year. An investor who deposited £10,000 into a Greggs account on January 2 would have just £7,300 today. That’s a loss of £2,700. Shares are down 20% in 12 months.

For those (like me) who have avoided Greggs due to its high valuation, today’s price represents a more attractive entry point. The stock is currently trading at 16.66 times earnings while its dividend yield has grown above 3%.

This may be a good time to consider investing, but patience is required. While Greggs’ long-term prospects remain solid, economic recovery may take some time. So even though the stock is cheaper, I have no intention of buying it.

Call me gloomy, but I suspect the UK economy may get worse before it gets better.