Although it is losing customers, Goodfood is improving its financial results, while the ready-to-prepare meal specialist is cutting expenses and focusing on high-paying customers.
The Montreal company managed to significantly reduce its net loss and generate positive cash flow in the third quarter ended June 3. The company shows this improvement despite a decrease in sales.
“Operational efficiencies resulting from our efforts have allowed us to streamline our operations and generate strong margins,” President and CEO Jonathan Ferrari said on a conference call Tuesday. to discuss the quarterly results.
Goodfood reported a loss of 1.1 million in the third quarter ended June 3, compared to a loss of 21.1 million in the same period last year. Revenues, for their part, declined by 37% to 42.1 million.
The results show that Goodfood’s new strategy is bearing fruit, but the challenge will be to eventually grow sales, believes analyst Frédéric Tremblay of Desjardins Capital Markets. “It brings some uncertainty about the marketing spend needed, especially to reduce the erosion of the number of customers. »
The company had 119,000 active customers in the third quarter. This is less than the 124,000 subscribers registered three months earlier.
Mr. Ferrari believes the company is able to acquire new customers at low cost. Goodfood managed to increase their customer reactivation rate by 20% to “around 30% to 40%”.
“We tested different paid strategies (ad spend) or on our own platforms,” he explained. Overall, this had a significant favorable effect on the cost of customer acquisition. »
Goodfood changed its strategy last fall, focusing on achieving profitability faster rather than increasing the number of subscribers. It also abandoned its online grocery service.
With rising interest rates, several technology companies have been forced to revise their strategy while creditors and shareholders have become less patient with growing companies that are not yet profitable.
In February, Investissement Québec bailed out the coffers of the company with an investment of 10 million.
The company thus relies on its highest-paying consumers. It specifically targets customers who have spent the equivalent of $10,000 since subscribing to the service with promotional offers and events. “We continue to learn what matters most to these customers and we use that knowledge to build our VIP program. »
Investors reacted well to the results. Goodfood shares rose 6 cents, or 12.1%, to 51 cents on the Toronto Stock Exchange in the afternoon.
