HelloFresh Shares Plummet 40% Following Earnings Alert
Shares in the food delivery company HelloFresh plummeted by more than 40% after the German meal-kit maker warned that its earnings would fall below expectations. HelloFresh anticipated earnings between €350m (£298m) and €400m (£341m) for the year, a significant drop from the €568m (£484m) previously estimated by analysts. The company also abandoned its revenue and profit targets for the following year, citing increased costs for developing its “ready-to-eat” business.
The downturn in revenue warnings coincides with HelloFresh’s fine for sending millions of spam emails and texts to customers. In January, the UK’s Information Commissioner’s Office (ICO) ordered the meal-kit firm, founded in 2011, to pay £140,000 following a 2022 investigation.
HelloFresh and competitors such as Gousto and the Mindful Chef experienced a surge in business during the peak of the COVID-19 pandemic when lockdown measures were in place. However, customer numbers have declined as restrictions eased, coupled with rising living costs. The company reported a decrease in subscribers from over 8.5 million in 2022 to 7.1 million as of the latest figures. Share prices, once close to €100 during the pandemic’s peak, fell to less than €7 on Friday.
The company stated that it had re-evaluated its business plan and was unlikely to reach its mid-term revenue target of €10bn by 2025 due to the “very different operating environment.” In November, HelloFresh had already reduced its profit estimate 2023, citing lower-than-expected sales growth and increased costs for its North American unit.
Investment bank JP Morgan noted that HelloFresh’s recent history of unreliable guidance may lead investors to shy away from the stock until more positive results are demonstrated. This struggle mirrors a similar move by rival Gousto, which recently slashed its valuation by offering discounted shares to investors, raising approximately £50m. HelloFresh’s challenges highlight the broader impact of changing consumer behavior and economic conditions on the meal-kit delivery industry.
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