Aussies just haven’t got the time and energy to work around a planned meal kit, and that’s not ending well for meal kit delivery services like My Food Bag (ASX: MFB), with its earnings down nearly 40%.
At the end of January 2023, deliveries were down 11.8% compared to last year. Revenue was down 8.0%, and EBITDA was down 39.2%. As the Company grapples with growing inflation, lowering demand and cost-cutting within households, its EBITDA guidance for FY23 amounts to between $17 million and $19 million. During Covid, its earnings were over $30 million, for perspective.
Recently appointed My Food Bag CEO, Mark Winter, commented, “Trading in FY23 has remained challenging, with inflationary pressure on households and low consumer confidence resulting in more subdued demand. These challenges have continued through the traditional “win back” period following the summer holidays, with lower than forecast trading continuing since the two recent long weekends.”
The Company has to adjust costs to stay in the game. It is proactively managing input cost pressures and ingredient supply challenges to keep its product offerings attractive and gross margin levels remain strong.
Winter added, “Within our brand portfolio, we have seen Bargain Box (our lowest cost brand) perform relatively strongly in this environment. While this has had an unfavourable impact on brand mix from an earnings perspective, we have seen the contribution from our growing range in the My Food Bag Kitchen continuing to support average order value.”
On the automation front, My Food Bag’s investment in pick technology at a significant Auckland assembly facility is complete. It is expected to be commissioned and go live in the coming weeks. It plans on rolling out the same pick technology at our Christchurch facility in May 2023.
The Chairman of My Food Bag, Tony Carter, paints a more optimistic picture of the ongoing financials. Though he admits that it might be disappointing, plenty of silver linings exist. “My Food Bag remains a profitable Kiwi business, has low debt levels and continues to generate positive cash flow. The business continues to progress strategic initiatives in order to pursue growth. Our investment in pick technology will deliver a material reduction in operating costs when fully commissioned,” he noted.
This optimism is mellowed by the impact of Cyclone Gabrielle in the North Islands, New Zealand. Winter added, “While our facilities continue to operate as normal, we expect some additional challenges and cost as a result of disruption to deliveries to the worst affected regions, and from the impact on our suppliers.”
Amid declining profits and ongoing challenges, the Company has shifted priorities and even renewed its board. In September 2022, its ex-CEO Kevin Bowler resigned overnight as CFO Mark Winter replaced him as CEO, officially in November. The Company also appointed a new CFO, Leanne Dekker, to start in March 2023.
In 1H FY23, the Company’s net profit was $5.9 million, down over $3 million on 1H FY22. Since Covid subsiding, My Food Bag has transitioned to My Futile Bag. As it shifts focus to automation and discounts, will the Company be able to return to its Covid-like glory days, or is this the end of the meal kit delivery boom?
Alinda is a Business Reporter for The Sentiment
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