HelloFresh Profits Soar with 11% Rise in Shares

Shares of German meal kit company HelloFresh experienced a significant increase on Tuesday, rising as much as 20% in morning trading after the firm reported better-than-expected profits for the second quarter. By 6:19 a.m. ET, the stock had settled at 5.90 euros ($6.44), reflecting an 11% gain. The company disclosed adjusted earnings before interest, tax, depreciation, and amortization of 146.4 million euros for the quarter ending June 30, surpassing analysts' expectations of 123 million euros, despite a 23.7% decline from the previous year. HelloFresh's revenue for the quarter reached 1.95 billion euros, marking a 1.7% increase. The company attributed its positive results to robust growth in its ready-to-eat meal delivery segment, which saw a remarkable 50.2% year-on-year increase in the first half of 2024. This growth comes as HelloFresh pivots towards ready-made meals, a strategic shift prompted by declining demand for its traditional meal kits following the end of Covid-19 lockdowns. In a bid to strengthen its presence in the ready-meal market, HelloFresh acquired Factor, a ready-made meal company, for up to $277 million in 2020. The firm noted that the expansion of this category, along with increased average order values in North America and international markets, helped offset a decline in meal kit orders during the first half of 2024. However, the ramp-up in ready-to-eat meal production has impacted overall sales costs, leading to a decrease in the group contribution margin to 24.3%. Earlier this year, HelloFresh shares faced a steep decline, plummeting 42% in March after the company issued a disappointing annual earnings outlook. Analysts at UBS remarked that the outlook was "far worse" than anticipated, highlighting ongoing challenges for the firm.