HelloFresh, the German meal kit firm, experienced a significant surge in its stock on Tuesday following the announcement of a profit that exceeded expectations in the second quarter. The company also reported rapid growth in its ready-to-eat meals segment, which contributed to the positive performance.
Shares of HelloFresh rose by 11% to 5.90 euros ($6.44) after initially climbing as much as 20% during morning trade. The company disclosed that it had achieved adjusted earnings before interest, tax, depreciation, and amortization of 146.4 million euros in the three months ending on June 30, surpassing the forecast of 123 million euros made by analysts surveyed by LSEG.
Despite a 23.7% decrease from the same period last year, HelloFresh saw its revenues grow by 1.7% to 1.95 billion euros in the quarter. The firm attributed this increase to the strong performance of its ready-to-eat meal delivery business, which experienced a 50.2% year-on-year growth in the first half of 2024.
To capitalize on the growing demand for ready-made meals, HelloFresh made a strategic decision to expand its presence in this category. The acquisition of Factor, a company specializing in the preparation of ready-made meals for delivery, for up to $277 million in 2020, was a key move in this direction.
While the company’s expansion into the ready meal category and the growth of its average order value in North America and international markets offset a decline in order volumes for meal kits in the first half of 2024, it also resulted in increased costs. As a result, HelloFresh’s group contribution margin dropped to 24.3% in the second quarter of 2024, down from 28.4% in the same period last year.
This performance comes after HelloFresh faced a significant setback in March when its shares plummeted by as much as 42% due to disappointing 2024 annual earnings outlook. Analysts at UBS had expressed concerns about the company’s guidance, highlighting that the outlook was worse than anticipated.
Overall, HelloFresh’s recent financial results showcase its ability to adapt to changing consumer preferences and market dynamics by focusing on expanding its product offerings to meet evolving needs. The company’s strategic moves in the ready-to-eat meal category have proven to be beneficial, driving growth and contributing to its overall performance.