HelloFresh's marketing costs take a bite out of full-year outlook

  • Q3 adjusted EBITDA down 10%, below expectations
  • Revenue up 31.4% to 1.86 billion euros
  • Confirms FY forecast
  • Company one of the big winners of pandemic
  • Concerns grow about tightening household budgets

Oct 27(Reuters) - HelloFresh (HFGG.DE) warned on Thursday that full-year results would be in the lower half of expectations as the German meal-kit maker spends more on advertising to retain customers amid consumer concerns about higher food and energy bills.

The outlook came as the company reported a 10% drop in third-quarter AEBITDA to 71.8 million euros ($72.3 million), below an average of 75.6 million euros estimated by analysts in a company-provided poll.

Revenue jumped 31.4% to 1.86 billion euros, beating estimates of 1.79 billion euros, as the company passed on higher food prices.

Meal-kit and food delivery companies were among the big winners of the COVID pandemic lockdowns as people splashed out on subscriptions and perks.

But they are now ramping up investments to keep customers amid fears of weakening consumer spending.

Marketing expenses in the third quarter as a percentage of revenue increased by 3 percentage points to 17.8%.

HelloFresh said it will focus on trying to keep prices affordable against competitors and offering a wider selection of recipes after increasing prices in early 2022 for the first time in many years by 6-7% on average.

HelloFresh shares, which have slid 66% from all-time highs in December last year, were up 1% at 0843 GMT after spiking as much as 7% in morning trade.

Investors were relieved the company did not scrap its full-year guidance.

"There was a lot of concern among investors, given profit warnings from other e-commerce players, that HelloFresh might lower guidance," said Berenberg analyst Sarah Simon.

The company forecast constant currency revenue growth would be in the low teens in the fourth quarter and adjusted core profits (AEBITDA) would be between 140 million euros and 175 million euros.

"We don't like the elevated levels of marketing investments during the quarter, but the results of those (may) be seen in the fourth quarter," Jefferies analysts wrote in a note.

($1 = 0.9935 euros)

Reporting by Linda Pasquini; Editing by Josephine Mason, Jan Harvey and Susan Fenton

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