(In the roundup of 08.03.2024 at 10.38 a.m. the quote was corrected and indirectly reproduced: The manager refers to the number of active customers).

BERLIN (dpa-AFX) - The cooking box mail order company Hellofresh is preparing for difficult years ahead. The MDax company's business is burdened by customer reluctance. This is unlikely to change in the foreseeable future, and the Management Board is therefore backing away from its medium-term targets. The operating margin target previously set for 2025 is only likely to be achievable in the long term. In addition, CFO Christian Gärtner announced in a conference call with analysts that Hellofresh will no longer publish the number of active customers on a quarterly basis from the first quarter of 2024. Investors did not like the news at all. The Hellofresh share price slumped by 46 percent to 6.35 euros on Friday morning. In comparison: at the height of the coronavirus pandemic, it was almost 100 euros.

"In our opinion, the credibility of the Group's forecasts has been seriously damaged," wrote analyst Simon Baker from French bank Societe Generale. In recent months, the management has repeatedly reaffirmed its targets, only for them to be withdrawn shortly afterwards. Baker doubts that Hellofresh will be able to restore the confidence of its investors in the near future. He has now withdrawn his buy recommendation for the share.

Analyst William Woods from Bernstein Research interpreted Thursday evening's warning as further confirmation of his assumption that Hellofresh's business model is inherently weak. Sales growth depends on heavily discounted advertising offers. In addition, the credibility of the company's top management is likely to suffer again.

On Thursday evening, Hellofresh announced in Berlin that it was unlikely to achieve its medium-term targets. Previously, CEO Dominik Richter and CFO Christian Gärtner had set themselves the target of achieving a turnover of ten billion euros by 2025. Ten percent of this - or one billion euros - was to remain as earnings before interest, taxes, depreciation and amortization (EBITDA) adjusted for special effects. There is no sign of a new medium-term forecast or an announcement as to when the previously stated targets for 2025 are to be achieved.

Group CEO Richter is continuing to build on the Ready-To-Eat segment, which offers ready-to-eat meals. The manager hoped that the takeover of the US company would provide a second pillar to the main business with cooking boxes.

Hellofresh had become big with its pre-portioned ingredient packs. The company's business grew significantly, especially during the coronavirus pandemic, when lockdowns and fear of infection made eating out difficult. Since then, demand has slowed considerably, and even permanent discount campaigns are hardly convincing customers. Richter therefore wants to change its strategy: According to earlier statements, the ready meals division is to become the company's largest by 2025.

On Thursday evening, Hellofresh revealed that this division has grown by 50 percent compared to the previous year. Due to the expected strong demand, Richter wants to expand production capacities.

By contrast, things are looking bleak for the former sales driver of cooking boxes: "Currently", Hellofresh is reporting a loss in sales in the high single-digit percentage range. Over the course of the year, the sales and revenue gap is likely to become increasingly smaller. However, it appears that the dip cannot be fully compensated for.

There are already further signs of weak business in 2024, which is primarily based on cooking boxes: According to the figures, adjusted operating profit is likely to slump to between 350 and 400 million euros. According to preliminary figures, this result had already fallen from 477 to 448 million euros in the past year.

The Management Board's forecast is well below the average estimates of analysts, who had assumed a significant increase for 2024.

According to the management's plans, turnover is set to increase by two to eight percent after adjusting for currency effects. Last year, it rose by around 2.8 percent to around 7.6 billion euros. "2023 was clearly disappointing and below our expectations," said CEO Richter in the conference call.

Hellofresh assumes that revenue only increased slightly in the first quarter after adjusting for currency effects. The corresponding adjusted profit margin (EBITDA margin) is likely to be zero at best or even slightly negative. Accordingly, the operating result should either just break even or end with a slight operating loss. The Executive Board justified this with high marketing expenditure and the rapid ramp-up of the ready meals business. The significant decline in cooking box volumes should "ease" in the second half of the year.

Hellofresh had already slashed its targets for 2023 in mid-November. This was due to problems in the most important single market, the USA. In Arizona, the ramp-up of the new production facility for ready meals was delayed. In addition, water shortages in the desert state and a lack of personnel made the production processes more difficult. And in Illinois, the planned maintenance of a production facility took longer than expected.

It also became apparent at the time that customers were no longer as keen on Hellofresh products as in the past: Around Thanksgiving, new customer numbers were surprisingly low, the company reported. Hellofresh usually spends a lot of money in late summer and at the beginning of the fall months to attract new customers with discount promotions and even free cooking boxes./ngu/stw/mis