Today I would like to give you a detailed insight into the conference call of HelloFresh ($HFG (-6,83%) ), in which the results for the fourth quarter and full year 2024 were presented and the strategy and outlook for 2025 were explained.
Dominik Richter, the Group CEO, opened the conference and emphasized that Hello Fresh's goal is and remains to change the way people eat forever. For the first eight years, the company focused exclusively on Meal Kits, its largest and most profitable business segment to date. Over the last four years, however, HelloFresh has successfully built a market-leading position in Ready-to-Eat (RTE) meals and scaled its brands in this segment 20-fold, while achieving AEBITDA profitability and improved unit economics.
In addition, initial steps were taken into pet food, premium meat mail order and nutritional supplements to further diversify the addressable market potential (TAM) and revenues. HelloFresh is currently in a transition phase, which began last summer.
A central point of Richter's presentation was the strategic realignment, in which profitability is deliberately prioritized over pure growth. After two years of declining profits, the focus for 2025 is on two main goals: firstly, the successful implementation of an efficiency program, which was already launched in the second half of 2024, and secondly, a significant improvement in the customer offering for both Meal Kits and RTE, in order to ultimately achieve higher margins and a stronger cash flow. return to growth in the Meal Kits segment with higher margins and stronger cash flow.
The plan is to significantly enhance the customer experience through a wider menu choice, better value for money and improved service. The implementation of the efficiency program is crucial for short-term profitability and to generate cash flow for long-term investments. The efficiency program covers various areas of the company and is expected to lead to double-digit AEBITDA margins in the Meal Kits segment in the short term. segment in the short term. Initial successes of the program were already observed in the second half of 2024, in particular through higher ROI thresholds for marketing spend, which led to a deliberate acquisition of fewer but more profitable customers, and better support for existing customers.
The CapEx expenditure was reducedand the network is being adapted to future demand. In General & Administrative (G&A), management structures were simplified, regional teams merged and personnel savings achieved.
Richter also presented the highlights of the fourth quarter and full-year 2024 results. The revenue growth rate for 2024 was 0.9% at constant exchange rates, with strong growth in RTE offsetting the decline in Meal Kits. The contribution margin was further improved, driven by productivity increases in RTE production in North America and in North American Meal Kits. This was partially offset by the decline in the volume of Meal Kits and start-up costs for new fulfillment centers in Germany and the UK.
The AEBITDA margin for Meal Kits reached 9.8 % for the full year and even exceeded 14% in the fourth quarter5 . The AEBITDA margin for RTE was 1.6% for the year as a whole, but was impacted by high start-up costs in the first half of 2024; in the fourth quarter, it reached over 5%, a significant increase on the previous year. The free cash flow per diluted share amounted to EUR 0.425 . A share buyback program of EUR 150 million was completed and a new program of EUR 75 million was launched.
In the year 2024 114 million orders were delivereda decrease of around 4% compared to 2023, as the focus was placed on higher value customers. This focus was more pronounced in the fourth quarter and led to a decline in orders of around 7%, with North America being hit harder with a decline of 10% than the international business at 5%. The decline was exclusively due to fewer new customers as a result of the change in marketing strategy, while existing customers continued to show very robust order patterns. The positive sales growth was mainly driven by the increase in the average order value (AOV) by almost 5 %. In the USA, AOV rose more strongly than internationally due to the higher proportion of high-priced RTE meals.
For the full year 2024, sales growth amounted to 0.9 % at constant exchange rates, with sales falling by 3 % across the Group in the fourth quarter (North America -4 %, international -1 %). The trends from the fourth quarter are largely expected to continue in the first quarter of 2025, as the efficiency programme is based on reduced marketing expenditure and the prioritization of profitability over growth.
For the full year 2025, sales are expected to decline by 3 % to 8 % at constant exchange rateswith the first quarter expected to be at the lower end of this range. Meal kit sales are expected to decline by more than 10% (Q1 in the mid to high negative 10s), while RTE is expected to grow in the low to mid 10s (Q1 slightly below 10%).
In the subsequent question and answer session analysts asked questions on various topics:
Sven Sauer (Kepler Cheuvreux) asked about the RTE outlook for 2025 and why growth is expected to be so low. Dominik Richter explained that the RTE business has grown 20-fold in the last four years and that they want to learn from the experience with Meal Kits in order to achieve sustainable growth in sales and profits. sustainable growth in turnover and profit. and profits. This includes investing in the brand and customer offering without overdoing the marketing, and adapting the TAM to customer growth. Growth in the low to mid-teens is considered appropriate for 2025.
Nizla Naizer (Deutsche Bank) inquired about the the extent of the planned cost savings over the next few years. Christian Gartner referred to the Capital Markets Day in ten days' timeat which more detailed information will be provided. Naizer then asked about the assessment of current consumer sentiment in the USA . Gartner confirmed that a slowdown in consumption is being observed in the USA, which has also been factored into the forecast given.
Andrew Ross (Barclays) wanted to minimize the the decline in sales in the Meal Kits segment for 2025 in more detail. Dominik Richter explained that this was a consequence of the deliberately reduced new customer acquisition in the last six months and a further decline in marketing investments. The aim is to achieve to have a significantly improved customer offering by the back-to-school and then return to growth with a better product and higher profitability.
Marcus Diebel (JPMorgan) asked about the the different sales trends in North America and internationally in view of the reduced marketing expenditure. Christian Gartner said that the marketing spend in North America was reduced earlier and more . The international market is more heterogeneous and includes earlier phase markets such as France, where marketing spend is actually increasing with good ROIs. However, the ROI threshold for marketing is the same in both segments. When asked about Germany and the UK Gartner explained that marketing expenditure there was lower in the run-up to the crisis than in North America, which is why the decline is now less pronounced.
Christian Salis (Hauck & Aufhaeuser) inquired about the European RTE product launch in Germany. Dominik Richter expressed his satisfied with the consumer demandwhich is currently being curbed somewhat. However, there is still a lot to do, particularly in terms of menu size and the consideration of different dietary preferenceswhich are much more extensive in the USA. A major focus for 2025 will be on the own production of large parts of the foodto increase product variety.
The HelloFresh analyst conference clearly showed that the company has a clear focus on profitability and increasing efficiency for 2025. focus on profitability and increasing efficiency. efficiency. After years of strong growth, particularly in the RTE segment, the company is now consciously accepting a phase of lower sales growth in order to improve margins, reduce costs and invest in an improved customer offering.
The strategic realignment aims to generate profitable growth in the long term. The outlook for 2025 is ambitious and signals a significant increase in profitability and free cash flow.
It remains exciting to see how the strategic initiatives will play out in the coming quarters!
