Published: 2024-03-11 by, News Team in the Business & Finance news category

HelloFresh's Shares Plummet after Warning of Earnings Shortfall and Scrapping Revenue Targets

In a notable turn of events, HelloFresh, the prominent food delivery company, witnessed a staggering 40% drop in its shares following a stark earnings warning. The German meal-kit maker issued a cautionary statement, revealing that its expected earnings for the year would fall below previous estimates. Specifically, HelloFresh projected earnings ranging from €350 million (£298 million) to €400 million (£341 million), a significant decline from the earlier analyst estimate of €568 million (£484 million).

The company, widely known for its meal-kit services, also opted to abandon its revenue and profit targets for the upcoming year. HelloFresh attributed this decision to escalating costs in developing its "ready-to-eat" business segment. This revelation comes on the heels of the company being fined for sending millions of spam emails and texts to its customers. In January, the UK's Information Commissioner's Office (ICO) mandated HelloFresh to pay a £140,000 penalty following a 2022 investigation.

Founded in 2011, HelloFresh, along with competitors like Gousto and the Mindful Chef, experienced a surge in business during the peak of the COVID-19 pandemic when individuals were encouraged to stay at home. Customers engaged with the service by selecting meals from an online menu, receiving recipe cards and fresh ingredients in a weekly delivered box. Despite the initial boom, customer numbers have dwindled as pandemic restrictions eased and the cost of living increased. According to the company's latest figures, subscriber numbers have declined from over 8.5 million in 2022 to 7.1 million worldwide.

During the height of the pandemic, HelloFresh shares were trading near €100 each. However, as of the latest update, they were selling for less than €7, underscoring the company's recent challenges. HelloFresh recalibrated its business plan, expressing doubts about achieving its previously announced mid-term revenue target of €10 billion by 2025 due to the "very different operating environment."

In November, the company revised its profit estimate for 2023, citing lower-than-expected sales growth and increased costs for its North American unit. Investment bank JP Morgan noted a poor track record in providing reliable guidance by HelloFresh management, predicting that investors might shy away from the stock until tangible improvements in results occur.

HelloFresh's struggles align with those of its rival Gousto, which recently slashed its valuation when it raised approximately £50 million by offering discounted shares to investors. The challenges faced by these meal-kit providers underscore the evolving dynamics of the food delivery industry amidst changing consumer behaviors and economic landscapes.

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