- Ready meals play downgrades guidance yet again
- Sales are slowing and customer acquisition costs are rising
- Shares down almost 95% from IPO price
Shares in direct-to-consumer ready meals play Parsley Box (MEAL:AIM) plunged 30% to 12.25p after the group downgraded full year sales guidance by 16% to £19 million amid a continued slowdown in orders and rising customer acquisition costs.
Embattled Parsley Box’s latest dire update confirmed trading remains tough.
Total orders were down from 45% to 212,000 in the first half of 2022 as the cost-of-living crisis impacted the company’s target baby boomer demographic.
However, Parsley Box stuck with its full year forecast of a £4.1 million loss at the adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) level, which reflects a reduction in marketing spend and improved gross margins arising from an ongoing shift to fewer, yet higher value orders.
SALES SLOWDOWN CONTINUES
Parsley Box has proved a disastrous initial public offering (IPO) with the share price crumbling off the back of sales growth disappointments, numerous profit warnings and a dilutive fundraise.
Following the latest steep decline, they are almost 95% below March 2021’s 200p initial public offering (IPO) price.
Sales fell from £14 million to £9.6 million in the first half of 2022 as the loss-making prepared food delivery play saw declines in both new and repeat customer sales amid diminishing returns from its marketing spend, though the adjusted EBITDA loss reduced by 42% to £2.1 million as the company reined in marketing spend and trimmed overheads.
RISING ACQUISITION COSTS
Parsley Box warned the cost of acquiring new customers has continued to increase, reaching £34 in the first half, up from £31 a year earlier while the cost of a repeat order has risen from £3 to £6 year-on-year.
‘Deploying cost effective marketing spend continues to be a key challenge in the business and the marketing strategy continues to evolve, led by the group’s new marketing director’, said the company.
Grappling with inflationary cost pressures, Parsley Box insisted it remains ‘well funded’ and explained it has taken the decision to ‘run the business to focus on cash while seeking opportunities to adjust the ongoing marketing mix’.
CEO Kevin Dorren commented: ‘We have continued our product innovation at pace to increase the opportunities for customers to order from us, and remain focused on balancing investment in customer acquisition and maintaining cash reserves, whilst we navigate the challenging consumer environment.
‘We recently brought down the price of a range of customer favourite meals to £2.95 to help alleviate the rising cost of living, and have frozen all prices until September. We remain well funded and continue to deliver quality, good value, and nutritious food.’
Following the update, broker Finncap slashed its price target from 33p to 21p to reflect ‘new forecasts, a tougher consumer outlook and the broader de-rating of the direct-to-consumer sector’.
