(Reuters) - HelloFresh is set to spell out how it plans to achieve its mid-term margin guidance on Thursday, with analysts querying whether the German meal-kit maker can keep customers and boost growth in a sluggish economy without splashing on marketing.
After the company's 2023 guidance missed expectations earlier this month, there are "rightly substantial questions in the market" around its medium-term targets, analysts at Credit Suisse (SIX:CSGN) said after the group's full-year results.
The key will be whether management can credibly explain how the company can reduce marketing as a proportion of sales by 1.5-2 percentage points whilst driving 10% revenue growth per year, analysts have said.
The Berlin-based company, which like other food delivery firms was a big winner of the pandemic lockdowns, forecast 2023 profit below analysts' expectations earlier in March, as it faces higher marketing costs to retain customers as economies reopen and inflation rises.
It said it would elaborate on how it would achieve its mid-term goal of 10% adjusted core profit (EBITDA) margin during its capital markets day on March 23, after it saw marketing spend rise to 16.8% of revenue in 2022 from 14.4% in 2021.
Analysts have said they are looking for more details on customer acquisition and retention costs, with Bernstein eyeing opportunities in HelloFresh's newest ready-to-eat segment.
Specifically, JPMorgan (NYSE:JPM) said it would ask management how many U.S. customers reported as of the fourth quarter were customers already in 2018-2021, and how many have been paying undiscounted prices.
"The ball is in HelloFresh's court to disprove the bear thesis that this is a business which has reached peak meal kit penetration in its core markets, and that future growth comes with expensive marketing costs required to retain and acquire customers," Barclays (LON:BARC) wrote in a note.
Analysts at Bernstein added that 2025 guidance might be downgraded. Credit Suisse said that once tailwinds from high average order value abate, growth will clearly be harder to obtain.