Technology
Tuesday, August 13th, 2024 2:40 pm EDT
Key Points
- Strong Q2 Performance: HelloFresh reported a better-than-expected profit for the second quarter, with adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) of 146.4 million euros, surpassing analysts’ forecasts despite being 23.7% lower than the previous year.
- Growth in Ready-to-Eat Segment: The company’s ready-to-eat meals segment saw significant growth, with a 50.2% year-on-year increase in the first half of 2024, helping to offset declines in its traditional meal kit product category.
- Stock Volatility: Despite the positive quarterly results, HelloFresh shares have faced significant challenges, including a 75% drop in the past year due to higher interest rates and concerns over the sustainability of its business model, which has struggled to maintain the rapid growth seen during the pandemic.
HelloFresh shares experienced a significant rise on Tuesday, climbing by as much as 20% during morning trading before stabilizing at a 10% increase, reaching 5.95 euros ($6.52) by 9:30 a.m. ET. This surge followed the company’s announcement of a better-than-expected profit for the second quarter, despite a year-over-year decline. HelloFresh reported adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) of 146.4 million euros for the quarter ending June 30, 2024, a 23.7% decrease from the previous year but still above the 123 million euros forecasted by analysts surveyed by LSEG.
Revenue for the quarter grew by 1.7%, totaling 1.95 billion euros. A key driver of this growth was the robust performance of HelloFresh’s ready-to-eat meal delivery segment, which saw an impressive 50.2% year-over-year increase in the first half of 2024. This segment’s rapid expansion has become a strategic priority for HelloFresh as the demand for its traditional meal kits, which involve weekly subscriptions for ingredients and recipes, declined following the easing of COVID-19 lockdowns.
HelloFresh’s strategic pivot toward the ready-meal category began in 2020 with its acquisition of Factor, a company specializing in ready-made meal deliveries, for up to $277 million. This move was part of a broader effort to diversify its product offerings and capitalize on the growing market for convenient, ready-to-eat meals.
In its recent earnings report, HelloFresh highlighted that the expansion of its ready-meal category, along with an increase in average order value in both North American and international markets, more than compensated for a decline in order volumes within its meal kit segment during the first half of 2024. However, this shift in focus has also impacted the company’s profitability. The ramp-up in production of ready-to-eat meals contributed to a reduction in overall sales costs, leading to a dip in HelloFresh’s group contribution margin, which fell to 24.3% in the second quarter of 2024, down from 28.4% in the same period the previous year.
Despite the positive news of better-than-expected quarterly profits, HelloFresh’s stock has faced significant challenges over the past year. The company’s share price has plummeted by 75% over the last 12 months, largely due to concerns over rising interest rates and skepticism about whether HelloFresh’s business model can sustain the rapid growth it experienced during the pandemic. In March 2024, HelloFresh shares suffered their worst-ever session, plunging by as much as 42% after the company issued a disappointing annual earnings outlook for 2024. At the time, analysts at UBS noted that while risks to HelloFresh’s guidance were already known, the firm’s outlook was “far worse” than expected.
Overall, while HelloFresh’s recent quarterly performance has provided a boost to its share price, the company continues to face significant headwinds as it navigates a challenging post-pandemic market environment and seeks to prove the sustainability of its growth strategy.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/08/13/hellofresh-shares-pop-11percent-as-meal-kit-giant-beats-profit-estimates.html
