Technology

Marketing Costs Take A Bite Out Of HelloFresh's Full-Year Outlook

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German meal-kit maker HelloFresh has warned that full-year results would be in the lower half of expectations as it spends more on advertising to retain customers amid consumer concerns about higher food and energy bills.

The outlook came as the company reported a 10% drop in third-quarter AEBITDA to €71.8 million ($72.3 million), below an average of €75.6 million estimated by analysts in a company-provided poll.

Revenue jumped 31.4% to €1.86 billion, beating estimates of €1.79 billion, as the company passed on higher food prices.

Meal-kit and food delivery companies were among the big winners of the COVID pandemic lockdowns as people splashed out on subscriptions and perks.

But they are now ramping up investments to keep customers amid fears of weakening consumer spending.

Marketing expenses in the third quarter as a percentage of revenue increased by 3 percentage points to 17.8%.

Keeping Prices Affordable

HelloFresh said it will focus on trying to keep prices affordable against competitors and offering a wider selection of recipes after increasing prices in early 2022 for the first time in many years by 6-7% on average.

HelloFresh shares, which have slid 66% from all-time highs in December last year, were up 1% at 8:43 GMT after spiking as much as 7% in morning trade.

Investors were relieved the company did not scrap its full-year guidance.

"There was a lot of concern among investors, given profit warnings from other e-commerce players, that HelloFresh might lower guidance," said Berenberg analyst Sarah Simon.

The company forecast constant currency revenue growth would be in the low teens in the fourth quarter and adjusted core profits (AEBITDA) would be between €140 million and €175 million.

"We don't like the elevated levels of marketing investments during the quarter, but the results of those (may) be seen in the fourth quarter," Jefferies analysts wrote in a note.

News by Reuters, edited by ESM – your source for the latest technology news. Click subscribe to sign up to ESM: European Supermarket Magazine.

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