HelloFresh Shares Soar 11% as Ready-to-Eat Meals Fuel Surprise Profit Growth

HelloFresh Shares Surge on Better-Than-Expected Q2 Profit

Shares of German meal kit company HelloFresh experienced a significant boost on Tuesday following the release of its second-quarter financial results, which surpassed analysts’ expectations. The company’s stock climbed as much as 20% during morning trading before settling at a 11% increase to 5.90 euros ($6.44) by 6:19 a.m. ET.

HelloFresh reported adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) of 146.4 million euros for the quarter ending June 30. While this figure represents a 23.7% decrease from the same period last year, it exceeded the 123 million euros forecast by analysts surveyed by LSEG. The company’s revenues also saw a modest increase of 1.7%, reaching 1.95 billion euros.

A key driver of HelloFresh’s positive performance was its ready-to-eat meal delivery business, which experienced robust growth of 50.2% year-on-year in the first half of 2024. This segment has become increasingly important for the company as demand for its traditional meal kits declined following the easing of Covid-19 lockdowns in 2021.

HelloFresh’s strategic expansion into the ready-meal category, including its 2020 acquisition of Factor for up to $277 million, has helped offset the decline in order volumes for meal kits. The company reported that the growth in its ready meal category, combined with increased average order values in North America and international markets, compensated for the reduced demand in its core meal kit business.

Despite these positive developments, HelloFresh faces ongoing challenges. The ramp-up in production of ready-to-eat meals has impacted the company’s overall sales costs, with the group contribution margin dropping to 24.3% in the second quarter of 2024, down from 28.4% in the same period last year.

The company’s stock performance has been volatile over the past year, with shares falling nearly 76% as investors questioned the sustainability of its business model post-pandemic. In March, HelloFresh experienced its worst-ever trading session, with shares plunging up to 42% following a disappointing 2024 annual earnings outlook.

While Tuesday’s stock surge provides a welcome reprieve for HelloFresh, analysts remain cautious about the company’s long-term prospects. The meal kit industry continues to face challenges as consumer behavior shifts and competition intensifies in the ready-to-eat meal segment.