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.
