Deliveroo downgrades growth forecast as cost of living crisis bites

Deliveroo has blamed “increased consumer headwinds” for trimming its forecasts as a cost-of-living crisis causes consumers to spend less on non-essential services like takeaways.

The London-based food delivery app said on Monday that growth for its full-year gross transaction value (GTV) – a measure of orders placed through its platform – would be between 4 and 12 percent on a constant currency basis, more than half its previous estimate of between 15 and 25 percent.

Deliveroo, whose 190,000 drivers operate in 11 markets globally, said it faces a “more cautious outlook” and its financial results for the same quarter of 2021 were buoyed by consumers ordering more groceries due to pandemic-related lockdowns.

The warning reflects broader pressures on the cost of living, which has resulted in slowing growth and smaller shopping baskets for individual orders. According to Takealytics, a research firm that tracks food apps, the average cost of a takeout has increased by an average of 8 percent since the beginning of the year.

“Management is confident in the Company’s ability to adjust financially to a rapidly changing macroeconomic environment through gross margin improvements, more efficient marketing spend and tight cost controls,” Deliveroo said in a statement.

The company said growth slowed to 2 percent in the first quarter, compared with 12 percent in the same period last year. The company kept its margin guidance for the year and expected adjusted earnings before interest, taxes, depreciation and amortization (ebitda) to fall between 1.5 percent and 1.8 percent, compared to 2 percent a year earlier.

In its second-quarter trading update, Deliveroo said it generated £3.56 billion in GTV in the first half of 2022, up 7 percent year-on-year.

Deliveroo stocks have struggled since their battle disastrous IPO in 2021, when £2bn was wiped from the company’s market value on the first day of trading, and are down almost 60 per cent in 2022.

Shares, which hovered at 390p, fell 3 percent to 82p in early trade on Monday.

Founded in 2013, the company delivers groceries from more than 160,000 restaurant partners and 13,000 grocery stores.

Monday’s warning of slacking consumer demand is the latest signal that online grocery delivery services are struggling to bounce back from the pandemic.

Competitor Just Eat Takeaway has lost more than half of its market cap this year. Uber Eats has said it has become profitable this year after launching in 2014, according to the company’s preferred adjusted metric, which excludes several costs including interest, taxes, depreciation and amortization.

Deliveroo’s numbers exclude Operations in Spainwhich Deliveroo withdrew from in November after the country enacted legislation to give workers in the gig economy the same rights as employees.

In the UK, drivers are still recognized as “self-employed” for the platform, although Deliveroo pays its couriers at least minimum wage while they’re logged into the app and delivering an order.

Deliveroo downgrades growth forecast as cost of living crisis bites Source link Deliveroo downgrades growth forecast as cost of living crisis bites

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