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Shares of German meal kit firm HelloFresh jumped on Tuesday after the company reported a better-than-expected profit in the second quarter and said its ready-to-eat meals segment saw rapid growth.
HelloFresh shares climbed as much as 20% during morning trade, but had pared gains to rise 11% to 5.90 euros ($6.44) as of 6:19 a.m. ET.
HelloFresh reported adjusted earnings before interest, tax, depreciation and amortization of 146.4 million euros in the three months ending on June 30, according to its earnings release Tuesday. The figure was down 23.7% from the same period last year, but exceeded the 123 million euros forecast of analysts surveyed by LSEG.
Revenues at the firm increased by 1.7% in the quarter, to 1.95 billion euros, HelloFresh said.
The company noted its results got a boost from healthy performance in its ready-to-eat meal delivery business, which saw 50.2% year-on-year growth in the first half of 2024.
HelloFresh made a more aggressive expansion into the ready-meal category a key priority as demand for its meal kits, which encourage people to cook with ingredients provided via a weekly subscription plan, declined following the easing of Covid-19 lockdowns in 2021.
HelloFresh acquired Factor, a company that prepares ready-made meals for delivery, for up to $277 million in 2020 in a bid to expand into the category.
The firm said Tuesday that expansion of its ready meal category, along with the growth of its average order value in North America and international markets, “more than offset a decline in order volumes in the meal kit product category” in the first half of 2024.
However, HelloFresh also said that this ramp-up in production of ready-to-eat meals was taking a chunk of costs out of overall sales. Its group contribution margin dipped to 24.3% in the second quarter of 2024, down from 28.4% in the same period last year.
In March, HelloFresh shares plunged as much 42% suffering their worst-ever session to date after the company disappointed investors with its 2024 annual earnings outlook.
Analysts at UBS said at the time that, despite risks already flagged around HelloFresh’s guidance, the firm’s outlook was “far worse” than anticipated.