The following segment was excerpted from this fund letter.
Hellofresh have managed to grow revenue 20x (from 0,3 to 6,0 billion EUR) in just 6 years. They have achieved this while going from cash burning to profitable and is now doing share buybacks. Even though the business got a Covid boost it was a structural grower before Covid.
Hellofresh manage to open up in new markets and constantly take market share from competitors in existing markets. Even if meal kits will only growth 5-15% per year from here we see big upside in “ready-to-heat” meals, breakfast, supplemented groceries from Hellofresh market etc. This will improve AOV and basket size and thereby improve unit economics and margins.
Because Hellofresh is a subscription-based E-commerce business (like Naked Wines) it falls in between chairs. Analysts that cover subscription businesses think retention is too low and analysts who cover eCommerce don’t understand the subscription part.
In our world we can see the irony that people doubt the unit economics of a fast-growing company that is cash flow positive and doing buybacks while having no problem doubting them in heavily loss making SaaS-companies.
We think Hellofresh is a category leader with a great business model and management team that is trading at cheap multiples.
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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