My Food Bag said co-founder Nadia Lim inspired the meal kits at the centre of its business model. Photo / Supplied
My Food Bag said co-founder Nadia Lim inspired the meal kits at the centre of its business model. Photo / Supplied
My Food Bag had a more sluggish start to trading than expected this financial year, with Omicron blamed for supply and delivery hiccups.
And a fund management expert said food, labour and transport inflation costs, as well as aggressive competitors, were taking a bite out of the company's bottom line.
In a trading update today, My Food Bag said deliveries were down 3.8 per cent compared with the end of July last year.
My Food Bag said co-founder Nadia Lim inspired the meal kits at the centre of its business model. Photo / Supplied
But it said active customer numbers recovered from the start of the year to reach 73,145, slightly ahead of 72,105 a year earlier.
The shares fell 6c, or 7.5 per cent, to 74c, an all-time low since listing in March 2021 at 1.76, which was below the initial public offer price of $1.85.
My Food Bag users could choose recipes with New Zealand ingredients delivered to homes. Photo / Supplied
In a trading update back in January, the company said it was preparing for a likely surge in community Omicron cases.
But today's FY23 update showed the highly infectious Covid-19 strain caused major disruption anyway.
My Food Bag said Omicron hurt supply-side confidence this year as the company and suppliers struggled with incomplete and late deliveries.
"My Food Bag responded to these challenges at the time by further simplifying its product offering and reducing marketing activity, which had the effect of a slower start to FY23," the company added.
Inflation and a broader, nationwide economic malaise were also impacting business.
The company said pressure on domestic budgets led to a stronger Bargain Box performance within its brand portfolio.
But that boost to Bargain Box and a tendency for financially strained consumers to opt for smaller bags negatively impacted earnings.
At the end of July, My Food Bag revenue was up 2.5 per cent but ebitda (earnings before interest, taxes, depreciation, and amortisation) shrank about 8.5 per cent compared to the same time last year.
My Food Bag said it was working on increasing customer order frequency, and had launched a loyalty campaign.
Damage from inflation and weather events had to be managed through price increases and ingredient substitution where possible, the company added.
Prices of some ingredients have surged in New Zealand lately, with overall food prices 7.4 per cent higher last month compared with July 2021, according to Stats NZ.
Due to lower earnings performance and expected impact from ongoing economic challenges, My Food Bag's full year earnings were anticipated to be less than in FY22.
When releasing its annual results in May, the company said it delivered more than 18 million meals across FY22.
And in its 2022 Annual Report, My Food Bag said it achieved record revenue of $194 million and delivered in line with forecasts.
Analyst: Aggressive market
Matt Goodson, Salt Funds Management managing director, said food, labour and transport were drivers of inflationary pressure for My Food Bag.
Goodson said in Salt's opinion, My Food Bag had also probably been underspending on advertising and promotion compared to some rivals.
"They're up against some pretty aggressive marketing expenditure from their competitors."
He said today's warning would be disappointing for investors but there was no sign the company was in distress.
"In terms of the business, the balance sheet's okay."
Although My Food Bag might face a nuanced mix of challenges from inflation, weather and belt-tightening, other companies and sectors also faced similar pressures.
"They're relatively food and labour intensive in terms of their cost base," Goodson added.
"The wider your profit margins, the less your exposure."
Goodson said My Food Bag had margins wider than supermarkets but less ability to pass costs on.
Cecilia Robinson, one of My Food Bag's five co-founders. Photo / Supplied
My Food Bag listed on the stock exchange in 2021. Its co-founders were Theresa Gattung, Cecilia and James Robinson, and another couple, Nadia Lim and Carlos Bagrie. They all had left the My Food Bag board ahead of its IPO with private equity company Waterman Capital selling down its majority stake.
This year the company and some of its prominent figures have frequently been in the spotlight.
The couple farmed at a 485ha Central Otago sheep and barley farm on the Crown Range.
The programme would air from the end of October, Lim told The Country's Jamie Mackay.
And there was controversy in May when rich-lister Simon Henry derided Lim's minor photo part in an earlier My Food Bag sharemarket listing prospectus.
Henry infamously told NBR: "When you've got Nadia Lim, when you've got a little bit of Eurasian fluff in the middle of your prospectus with a blouse unbuttoned showing some cleavage, and that's what it takes to sell your scrip, then you know you're in trouble."
A news and social media firestorm erupted afterwards, with Henry accused of misogyny.
