Marley Spoon (ASX:MMM) share price crashes 34% to new 52-week low

A downward revision is spooking investors. We have the details

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The Marley Spoon AG (ASX: MMM) share price is tanking. The massive price drop comes after the meal kit subscription service gave an update for the September quarter.

At the time of writing, shares in the company are trading for $1.04 – down 31.1%. Earlier, shares hit an intraday and 52-week low of 99 cents per share, which is a 34.4% pummelling.

Let’s take a closer look at the news.

Why the Marley Spoon share price is in freefall

The Marley Spoon share price is heading south and it comes after the company’s Q3 FY21 update, released after the market closed yesterday.

What is seemingly spooking investors is the downward revision of its full-year net revenue. The company blames “volatile consumer behaviour” for the downward growth rate of only 26-28% as opposed to the previously advised 30-35%.

Specifically, the company says “staffing challenges, higher labour rates, and food cost inflation are continuing to impact contribution margin”. This is in addition to “extensive” summer holidays from Europeans enjoying leisure activities after months of lockdown. Apparently, this resulted in “higher skip rates and lower acquisition volume”.

As well, Marley Spoon advised revenue grew 14% on the prior corresponding period (pcp) to 79.2 million Euros ($112.8 million) and a total cash position of 33 million Euros ($51.1 million) – up 17% on the pcp.

Compared with net revenue from its H1 21 update – which grew 38% — this is a massive downgrade in growth projections.

Management commentary

Commenting on the update likely driving down the Marley Spoon share price, CEO Fabian Siegal said:

Q3 net revenue growth is broadly in line with our expectations and an acceleration vs. the last quarter. Nevertheless, volatile customer behaviour during the Northern Hemisphere summer resulted in higher-than-normal skip rates and a higher cost acquisition environment. In order to maintain attractive unit economics, we reduced customer acquisitions, which will impact Q4 and therefore require us to revise our 2021 net revenue growth to 26-28%.

We have since seen a recovery in base behaviour and improved customer acquisition costs. Given these factors, Q4 net revenue growth is trending higher than Q3 2021 and the PCP. The overall structural growth trend for online groceries remains intact and gives us confidence that we will continue to sustain high growth rates at attractive unit economics.

In Q4 we expect continued revenue growth and expanded margins to lead to a significantly lower level of operating EBITDA [earnings before interest, taxes, depreciation, and amortisation] losses vs. Q3.

Marley Spoon share price snapshot

Over the past 12 months, the Marley Spoon share price has crashed by around 60%. Year-to-date it is down by a similar percentage.

Marley Spoon has a market capitalisation of approximately $302 million.

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Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Marley Spoon AG. The Motley Fool Australia owns shares of and has recommended Marley Spoon AG. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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