After two forecast cuts within a few months, the pressure on HelloFresh's management is growing.

Some investors doubt that the food delivery company can compensate for the weakness of its core business with cooking boxes with its fast-growing ready meals division. "If this does not lead to success, changes will be urgently needed," warns portfolio manager Christian Reindl from asset manager and HelloFresh shareholder Union Investment.

The Berlin-based company aims to increase sales of ready meals by 50 percent in 2024 for the second year in a row. However, DZ Bank analyst Thomas Maul points out that the costs of the European expansion of this division, which has so far mainly been active in the USA, are putting pressure on profits. It remains to be seen how quickly HelloFresh can increase its margin from the current four percent to a double-digit percentage.

Ready meals are potentially a multi-billion business, says analyst Sebastian Patulea from investment bank Jefferies. However, it is unclear how the expansion into Europe will develop. His colleague Jo Barnet-Lamb from the bank UBS sees HelloFresh facing a rocky road. In the USA, people are used to reaching for ready meals for a quick bite. In European countries such as Spain or Italy, on the other hand, the focus is on social interaction during a shared meal.

HIGHS DURING THE PANDEMIC ARE FOLLOWED BY A CRASH

Like online retailers and delivery services, HelloFresh also experienced a boom during the coronavirus pandemic. However, consumers are now eating out more often again. In addition, many of them are having to tighten their belts due to the sluggish economy and rising inflation. As a result, HelloFresh has lost a good 90 percent of its stock market value compared to its record high in 2021. "We were wrong to assume that we would be able to maintain our profit margins at the peak level of the pandemic," admitted CEO Dominik Richter when announcing the preliminary figures for 2023 last week.

For this reason, Portfolio Manager Reindl expects a restructuring program to be announced at the annual press conference on Friday. "HelloFresh must come to terms with the fact that the strong growth rates of the coronavirus years are over and address the cost base," says Reindl. He advises using part of the capacity for the ready meals cooking box business. This would be cheaper than completely rebuilding everything. Otherwise there is a risk of redundancies and plant closures. "We cannot confirm any plans for a restructuring program," says a HelloFresh spokeswoman.

(Report by Hakan Ersen, edited by Ralf Banser. If you have any queries, please contact our editorial team at berlin.newsroom@thomsonreuters.com (for politics and the economy) or frankfurt.newsroom@thomsonreuters.com (for companies and markets).)

- by Andrey Sychev and Paolo Laudani and Marleen Kaesebier