Research Update: German Food Company HelloFresh Outlook Revised To Negative On Reduced Profitability Prospects; 'BBB-' Rating Affirmed

HelloFresh's profitability guidance of €350 million-€400 million in 2024 is substantially lower than our previous base-case forecast, reflecting the normalization of demand for meal kits and the company's shift toward ready-to-eat meals. A stronger focus on ready-to-eat meals dilutes the group's margins, while the volume decline in meal kits leads to efficiency losses, likely resulting in an S&P Global Ratings-adjusted EBITDA margin of 4.6% in 2024 versus 5.6% in 2023, and our debt-to-EBITDA ratio rising to 1.7x compared with our 1.5x threshold for the rating. Consequently, we revised our outlook on HelloFresh to negative from stable and affirmed our 'BBB-' long-term issuer credit rating on the company. The negative outlook indicates that we could lower the rating over the next

...- HelloFresh's profitability guidance of 350 million-400 million in 2024 is substantially lower than our previous base-case forecast, reflecting the normalization of demand for meal kits and the company's shift toward ready-to-eat meals. - A stronger focus on ready-to-eat meals dilutes the group's margins, while the volume decline in meal kits leads to efficiency losses, likely resulting in an S&P Global Ratings-adjusted EBITDA margin of 4.6% in 2024 versus 5.6% in 2023, and our debt-to-EBITDA ratio rising to 1.7x compared with our 1.5x threshold for the rating. - Consequently, we revised our outlook on HelloFresh to negative from stable and affirmed our '###-' long-term issuer credit rating on the company. - The negative outlook indicates that we could lower the rating over the next 24 months if EBITDA margins stay below 5% and absolute EBITDA declines to below our expectations, or if debt to EBITDA exceeds 1.5x and funds from operations (FFO) to debt drops and remains well below 60%,...

Research Update