The Youfoodz (ASX:YFZ) share price is down 15% today. Here's why

The Youfoodz Holdings Ltd (ASX: YFZ) share price was one of the worst-performing IPOs of 2020. And the numbers just got worse.

| More on:
Man pinching nose and holding other hand up in a stop gesture turning away.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

sdf

The Youfoodz Holdings Ltd (ASX: YFZ) share price is one of the worst-performing initial public offerings of 2020. Its shares have struggled to gain traction, falling from a listing price of $1.50 to a close of 70.5 cents on Thursday. 

The company announced its third-quarter update with FY21 guidance today. At the time of writing, the Youfoodz share price has plummeted 14.8% and is now trading at 60 cents.

What's driving the Youfoodz share price down? 

During the third quarter, Youfoodz prepared a total of 4.9 million meals, representing a 23.6% increase on the prior corresponding period (pcp). This translated to an 18.2% increase in gross revenues to $35.3 million. 

The company believes the results demonstrate the continued momentum in the business compared to the pcp, which captured a strong uplift in customers and revenues due to initial COVID-19 lockdowns across Australia. 

Revenue breakdown

The Youfoodz business generates revenue from two key segments, B2C (home delivery) and B2B (wholesale).

The update highlighted a 41.2% improvement in B2C revenues to $34.6 million. This was driven by a range of marketing initiatives resulting in rapid customer acquisition and active customer growth. The B2C segment has seen customer order frequency over the quarter remain relatively consistent at approximately 2.6 for the quarter and a 10.4% increase in average order value to $96.8 per order. 

The company launched its partnership with Velocity during the quarter, providing access to its ~10 million program members. While early in the relationship, the company has been pleased with the customer take-up to date. 

B2B revenues during the quarter decreased 3.8% to $15.6 million. The company blamed uncertainty associated with localised lock-downs resulting in minimal stocking levels from customers. Sales to gym and corporate customers were also negligible.

Looking ahead

As the pandemic restrictions have been lifted, the company sees some early indications that customers are beginning to increase orders in the fourth quarter. However, it notes uncertainty as to when gym and corporate customers will recommence ordering. 

Youfoodz intends to strengthen its wholesale relationships and explore range expansion opportunities with existing customers. This is evident in supermarkets with a successful meal range extension with one large national supermarket customer and an agreement to launch its beverage range into another national customer in 4Q FY21. 

Overall, the company expects FY21 gross revenue to be within the range of $201 million to $205 million (vs. prospectus forecast of $199.8 million). 

However, given the underperformance of B2B and greater marketing and customer acquisition incentives, the company expects FY21 net revenue to be in the range of $146 million to $148 million (vs. prospectus forecast of $149.9 million). 

Why the Youfoodz share price is weaker on Friday

Redbubble Ltd (ASX: RBL) and Kogan.com Ltd (ASX: KGN) have delivered similar quarterly updates as Youfoodz – largely positive performances with slight negatives around areas such as margins, marketing investment and inventory. 

Today's major fall in the Youfoodz share price could reflect a market unimpressed with the company's underperforming B2B segment and missing prospectus revenue forecasts.

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Retail Shares

a woman wearing fashionable clothes and jewellery checks her phone with a satisfied smile on her face in a luxurous home setting.
Retail Shares

Why I think this ASX small-cap stock is a bargain at $7.85

I think this small company has big potential.

Read more »

A happy young couple celebrate a win by jumping high above their new sofa.
Retail Shares

Overinvested in Wesfarmers shares? Here are two alternative ASX retail stocks

These stocks could complement an investment in Wesfarmers.

Read more »

Happy shopper at a clothes shop.
Retail Shares

The share price of this All Ords stock has jumped higher again. Here's why

Here's why Myer's share price is outperforming.

Read more »

A smiling woman at a hardware shop selects paint colours from a wall display.
Retail Shares

Wesfarmers shares recently hit a 52-week high. Can they go higher?

This business continues to impress investors.

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
Retail Shares

Would Warren Buffett buy Lovisa shares right now?

Is this a sparkly opportunity?

Read more »

Happy shopper at a clothes shop.
Earnings Results

Why did Myer shares just rocket 9%?

Investors are piling into Myer shares on Friday. But why?

Read more »

a thoughtful shopper with shopping bags wearing sparkly gold dress and matching shoes reclines on a chair with hand to chin in thought.
Retail Shares

Can Lovisa's new high profile CEO take Lovisa shares to new heights?

Is Lovisa about to embark on a new era of growth?

Read more »

A woman sits on sofa pondering a question.
Retail Shares

After soaring 244% in 5 years, how much further upside does Macquarie tip for Nick Scali shares?

The broker's expectations remain steady.

Read more »