£9,000 invested in Greggs shares at the start of the new ISA year is now worth…

To say Greggs‘ (LSE:GRG) shares have been lukewarm in recent years would be an understatement. Down 40% in the past 36 months, this FTSE 250 stock has served up returns best described as a soggy baguette! 

However, performance has stabilised lately. In fact, someone who had put nine grand into Greggs’ shares at the start of the new ISA year in early April would now have about £9,900. 

They would also be entitled to the dividend the bakery chain is dishing out later this month. That would add another £158 to the mix. 

What’s going on at Greggs?

The company has faced various challenges in recent years. Chief among these has been stubbornly high inflation, whether in the shape of higher energy, ingredients and transport costs, as well as constrained consumer spending. 

The latter’s worth dwelling on because when people are skint they tend to travel less into town centres to buy things. They take less road trips and discretionary train journeys (Greggs has a growing presence in motorway services and stations). 

Reduced foot traffic obviously means less chance of people popping into shops for a sandwich or cheeky doughnut.

Earlier this week though, the company released a promising trading update for the first 19 weeks of 2026. Sales were up 7.5% to £800m, including a 2.5% rise in like-for-likes (LFL) sales at company-managed shops. 

But the encouraging number was that LFL sales grew 3.3% in the most recent 10 weeks. So business has been picking up after a slow start to the year (perhaps due to strained budgets after Christmas). 

Crucially, the firm said costs are being kept in check, with full-year cost inflation expected to be around 3%. This is pleasing to see given the ongoing uncertainty in the Middle East.

There were 20 net new openings in the period, bringing the total to 2,759 shops. And Greggs still plans to open another 120 in 2026, while targeting 3,000+ over the next few years. 

Have we reached peak Greggs? 

The firm has been adapting its menu to attract different people. The new Chicken Roll launched in April has gone down a treat, while its Matcha drink marks “an important step in appealing to new and younger customers”.  

Another noteworthy development is that Greggs will open a location at Tenerife South Airport. As a destination for millions of UK tourists every year, I reckon this will do well. 

Could we see Greggs popping up in other British travel hotspots like Ibiza, Mallorca and Benidorm one day? I see no reason why not.

Add in the scope for ‘bitesize’ outlets at more train stations, and I don’t believe we’ve reached ‘peak Greggs’ just yet.  

What about the stock?

The biggest risk here is the Iran war, which could push inflation higher in 2027, adding to cost of living pressures.

Taking a multi-year view though, I continue to believe that the stock’s undervalued. It’s trading at just 13 times forward earnings versus a 10-year average of around 21. 

On top of this, there’s a 4.2% prospective dividend yield. Payouts and potentially share buybacks from 2027 onwards should be supported by lower capital requirements following the completion of two state-of-the-art distribution centres.

On balance, I reckon Greggs is worth considering as a dividend-paying turnaround stock.