Hello Fresh Shares Plunge 40% After Earnings Warning

HelloFresh, the food delivery company, is facing a significant setback as its shares nosedived by over 40% after issuing a warning that its earnings would fall below expectations.

The German meal-kit maker anticipates earnings in the range of €350m (£298m) to €400m (£341m) for the current year, a notable decrease from the previously estimated €568m (£484m) by analysts.

In addition to revising its earnings outlook, HelloFresh has abandoned its revenue and profit targets for the upcoming year.

The company attributes these adjustments to escalated costs in the development of its "ready-to-eat" business.

This downward revision in revenue projections follows a penalty imposed on the company for inundating customers with millions of spam emails and texts.

The UK's Information Commissioner's Office (ICO) mandated HelloFresh to pay £140,000 as a result of 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 lockdowns prompted increased demand for home-delivered meals.

However, as restrictions eased and the cost of living rose, customer numbers dwindled. The latest figures reveal that the company's subscriber base has decreased from over 8.5 million in 2022 to 7.1 million globally.

During the pandemic's zenith, HelloFresh shares were valued at close to €100 each. However, as of Friday, the shares were trading for less than €7.

The company acknowledged the need to reassess its business plan and conceded that achieving its previously announced mid-term revenue target of €10bn by 2025 was now unlikely due to the "very different operating environment."

In November, HelloFresh had already revised its profit estimate for 2023, citing lower-than-expected sales growth and increased costs for its North American unit.

JP Morgan noted the management's recent poor track record in providing reliable guidance and suggested that investors might shy away from the stock until tangible improvements in results are evident.

These challenges for HelloFresh come on the heels of rival Gousto lowering its valuation last month, raising approximately £50m through discounted shares to investors.