Investors and shareholder activists have sharply criticized the management of the cooking box provider HelloFresh at the Annual General Meeting.

"Investors have still not digested two profit warnings in four months," said Linus Vogel, a specialist in sustainability and good corporate governance at fund management company Deka, on Thursday. "There is great concern on the capital market that more unpleasant news will be served up in the course of the year."

HelloFresh lowered its profit targets for 2023 last November and also withdrew its medium-term forecasts a few months later. Since then, the shares have lost around 70 percent of their value. At the start of the year, the company announced record quarterly sales. However, increased costs led to a slump in profits.

Christian Röhl from the Deutsche Schutzgemeinschaft für Wertpapierbesitz (DSW) described the departure from the medium-term targets as an indication of structural deficits in the monitoring of business performance and the preparation of forecasts. HelloFresh CFO Christian Gärtner rejected this. "Our long-term margin targets are in place. We want to achieve an operating margin of around ten percent in both of our main product groups."

Dominik Richter, Co-CEO of the Group, expressed his confidence in being able to regain lost trust. To this end, the company will communicate its plans and then deliver. Together with improved profitability, this will certainly be reflected in a recovery of the share price.

INVESTORS - EXPANSION HARBORS THE RISK OF BECOMING BOGGED DOWN

In the core business with cooking boxes, the strategy of halting the loss of customers through higher marketing expenditure is not working, Deka expert Vogel went on to criticize. Overcapacity should therefore be reduced and the focus should be on existing users. Although the Ready-To-Eat (RTE) division is growing strongly, expansion is expensive. "You can quickly make a mistake here."

Company boss Richter announced his intention to reduce marketing expenditure in the medium term. However, his company is investing in the modernization and expansion of both the product range and the production facilities for the cooking box business. As a result, the operating margin there will remain below the targeted figure of ten percent in the short term. "2024 will be an important transition phase for us here, in which we want to lay the foundations for future and sustainable growth."

Richter confirmed the planned expansion into other European countries for the ready meals division. The experience gained in the pilot markets of Belgium and the Netherlands makes him optimistic. He also sees great potential for growth in the US home market of RTE subsidiary Factor75.

DEKA WANTS TO DENY HELLOFRESH MANAGEMENT RELIEF

Deka expert Vogel announced that he would refuse to approve the actions of HelloFresh's Management Board and Supervisory Board. "The catastrophic share price performance coupled with the way the capital market has been communicated leaves us with no other choice at this point." Deka also rejects the anticipatory resolution for a capital increase. The amount is too high. DSW and the Schutzgemeinschaft der Kapitalanleger (SdK) agreed with this criticism. The latter also refused to approve the actions of the HelloFresh Management Board.

(Report by Hakan Ersen, edited by Ralf Banser. If you have any questions, please contact our editorial team at berlin.newsroom@thomsonreuters.com (for politics and the economy) or frankfurt.newsroom@thomsonreuters.com (for companies and markets).