Fewer but more profitable new customers: the meal kit mail order company Hellofresh is moving away from its aggressive growth strategy in its transition year and wants to concentrate more on profitability in the future. After an unexpectedly good third quarter, CEO Dominik Richter set his sights on the annual goals.
HelloFresh shares are falling
In the worst case scenario, the decline in profits in 2024 is likely to be somewhat smaller than previously communicated. However, the manager only expects minimal sales growth. Investors were nevertheless impressed: Hellofresh shares rose by more than 16 percent shortly after the new forecast was announced.
In 2024, earnings before interest, taxes, depreciation and amortization (Ebitda), adjusted for special effects, are expected to decline to between 360 and 400 million euros, the MDax group surprisingly announced on Friday in Berlin. So far there has been 10 million euros less on the list at the lower end of the range. However, CEO Richter now expects significantly less sales growth: revenue is expected to increase by 1 to 1.7 percent after adjusting for currency effects. So far, the manager had promised 2 to 8 percent.
In 2023, consolidated revenue based on constant exchange rates was 7.8 billion euros; the reported figure was 7.6 billion. The adjusted operating profit (Ebitda) was almost 448 million euros.
Hellofresh will target more profitable customers in the future
Hellofresh justified the adjusted annual targets with a new direction for its advertising materials: These were already reduced in the third quarter, which usually affects the acquisition of new customers. In the future, Hellofresh will target more profitable customers and in this context also points out that lower growth will be accepted for this. Expenses should also be reduced at the end of the year.
CEO Richter had recently announced in telephone conferences that he would move away from the previous aggressive advertising campaigns. In the past, Hellofresh had attracted customers with big discounts for the first deliveries or free cooking boxes. However, some of them got too used to the promotions and only ordered using vouchers. According to Richter, this should come to an end; Hellofresh wants to advertise more with freebies in the future.
Marketing expenses were always a thorn in the side of critical shareholders, who complained that they were too high and were detrimental to profitability. In the first six months of the year, the group spent around a fifth of its sales on advertising materials.
Hellofresh can increase sales
Based on preliminary figures, things went better for the Berliners in the third quarter than expected: they earned money in day-to-day business – also due to lower marketing expenses – adjusted for special items 72 million euros after 69 million a year earlier. Industry experts had expected a rapid decline in profits.
Sales climbed by almost two percent to around 1.83 billion euros in the third quarter at constant exchange rates. According to the company, analysts had roughly expected this. The board plans to publish the full figures this Tuesday (October 29).
Hellofresh shares have been on the rise for three months
The share price has risen by almost two thirds in the last three months. In addition to CEO Richter, one of the largest shareholders, investor Active Ownership is particularly pleased about the development – he joined Hellofresh in mid-August. However, anyone who has held the stock for a long time will be at a disadvantage. Since the turn of the year it has still fallen by around 35 percent – and anyone who bought it three years ago has to come to terms with a price loss of almost 90 percent.
Shareholders who got involved before the profit warning and the cancellation of the medium-term targets at the beginning of March also lost out. Hellofresh frightened investors with several bad news in the spring. The share price collapsed by more than 40 percent in just one day and analysts warned that the company’s management had lost credibility.
Hellofresh is currently also listed in the mood alarm in the Finanz100 apps. This stock is being hotly debated around the world. For alarm and further information click here!
