Greggs‘ (LSE:GRG) shares haven’t been this cheap since November 2020. After a brutal 2025 sell-off driven by consumer spending pressures, rising input costs, and a broader de-rating of consumer discretionary stocks, the beloved high street baker’s trading at a level most investors haven’t seen in nearly half a decade.

For long-term investors, that kind of reset demands attention.

So why’s the stock fallen so far?

The decline’s been driven by a combination of factors that converged at the worst possible time. Cost inflation across food, packaging, and energy squeezed margins precisely when the consumer was pulling back on discretionary spending. Throw in the added headwind of heavy rainfall followed by an unusually hot summer, and like-for-like sales growth slowed to a crawl last year.

Needless to say, investors were disappointed, especially considering the impressive momentum Greggs had delivered following the pandemic. And consequently, the stock lost its FTSE 250 darling status. But could it be about to get it back?

Are the early signs of recovery here?

Looking at Greggs’ May trading update, several promising green shoots have started to emerge. Total sales for the first 19 weeks of 2026 hit £800m – up 7.5% year on year. More encouragingly, like-for-like sales grew 2.5% in the year to date, accelerating to 3.3% in the most recent 10 weeks.

Neither of these figures comes close to the double-digit expansion Greggs had previously delivered. But they both suggest that trading momentum’s building. That’s an encouraging sign.

So what’s driving it? New menu launches are playing a meaningful role. The Chicken Roll, launched in April, quickly became a customer favourite alongside the famed Sausage Roll and Vegan Roll. New salad lines and drink innovations, including a popular Matcha launch, are broadening the appeal to younger customers.

Greggs also opened 41 new shops in the period and remains on track for around 120 net openings for the full year, with a first international airport trial launching at Tenerife South in the coming weeks.

Taking a step back

Despite the improving picture, management was clear-eyed about the challenges ahead. Cost inflation is still expected to run at around 3% on a like-for-like basis across 2026.

Greggs has taken proactive steps to hedge against this. The firm’s entered into forward purchase agreements covering around five months of food and packaging needs, along with 85% of 2026 energy and fuel requirements fixed in price, and around 50% for energy needed in 2027.

Nevertheless, management’s warned that a prolonged Middle Eastern conflict could push overall cost inflation higher through the end of 2026 and into 2027 – a genuine threat that needs to be considered carefully.

Is now the time to act?

The building blocks of a recovery are clearly in place. Slowly accelerating like-for-like sales, a growing shop estate, disciplined cost management, and a menu that’s landing well with customers.

Clearly, this isn’t a business in structural decline, despite what the cheap valuation might suggest.

Right now, Greggs’ shares are being offered at a discount that rarely emerges for a business of this quality and track record. The near-term macro uncertainty’s very real. However, for patient long-term investors, the risk-to-reward here looks genuinely compelling. That’s why I’m taking a closer look.