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

HelloFresh Stock Dives 40% Post-Earnings

In a significant turn of events, shares of the renowned food delivery giant HelloFresh have witnessed a staggering 40% plunge following a stark earnings warning. The German-based meal-kit company, which had previously been thriving in the market, issued a cautionary statement, indicating that its earnings were set to fall below initial projections.

HelloFresh disclosed that it anticipates earnings to range between €350m (£298m) and €400m (£341m) for the current fiscal year. This projection is notably lower than the €568m (£484m) estimated by analysts. Additionally, the company made the bold decision to abandon its revenue and profit targets for the upcoming year, citing escalated costs associated with the development of its "ready-to-eat" business segment.

The company's earnings alert comes hot on the heels of another setback: a substantial fine imposed due to its involvement in mass spamming activities. Following an investigation conducted by the UK's Information Commissioner's Office (ICO) in 2022, HelloFresh was ordered to pay a hefty £140,000 for inundating customers with unsolicited emails and texts.

Founded in 2011, HelloFresh, along with its competitors like Gousto and the Mindful Chef, experienced a surge in business during the peak of the COVID-19 pandemic. With stay-at-home orders in place, more people turned to meal-kit services for their culinary needs. However, as restrictions eased and living costs surged, HelloFresh witnessed a decline in its customer base, with figures dropping to 7.1 million subscribers worldwide, compared to over 8.5 million in 2022.

Despite shares trading close to €100 during the pandemic peak, the stock now languishes at less than €7 per share, reflecting the market's response to the company's recent developments. HelloFresh has also reassessed its business strategy, acknowledging that it's unlikely to achieve its previously announced mid-term revenue target of €10bn by 2025 due to the prevailing operational challenges.

In November, HelloFresh revised its profit estimates for 2023, attributing the adjustment to lower-than-expected sales growth and increased costs in its North American operations. This poor track record in providing reliable guidance has led investment bank JP Morgan to suggest that investors may shy away from HelloFresh's stock until substantial improvements are observed.

The struggles faced by HelloFresh are emblematic of broader challenges within the meal-kit delivery sector. Rival company Gousto, for instance, recently slashed its valuation and offered discounted shares to investors, signaling industry-wide turbulence and heightened competition. As HelloFresh navigates these turbulent waters, the road to recovery may prove to be arduous, but the company remains steadfast in its commitment to weathering the storm and emerging stronger than ever.

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