A Deliveroo driver near Victoria Station on March 31, 2021 in London, England.
Dan Kitwood | Getty Images
Losses at UK food delivery company Deliveroo widened in the first half of 2022, while sales growth slowed dramatically as the easing of pandemic restrictions and a rise in the cost of living hurt demand for online takeaway services.
Deliveroo reported a pre-tax loss of £147.3 million ($178 million) for the first six months of the year, up 54% from the same period last year. The losses were primarily caused by rising marketing and overhead expenses.
The company’s revenue rose 12% to £1 billion. That was much slower than the revenue growth the company reported in the first half of 2021, when revenue rose 82% year over year.
Deliveroo’s gross transaction value – which measures total sales on the platform – rose 7% to £3.6 billion, weak year-on-year growth when GTV doubled in the first half. The company blamed “challenging market conditions” for the disappointing performance.
Deliveroo said it is consulting plans to exit the Netherlands, marking the company’s latest exit from a key European market.
The company, which is threatened with much stricter gig economy laws in the European Union, had already withdrawn from Spain last year and from Germany in 2019.
The Netherlands accounted for just 1% of Deliveroo’s GTV in the first half of 2022, Deliveroo said.
Deliveroo reiterated its guidance for full-year revenue growth. Last month, the company revised its 2022 GTV growth target to a range of 4% to 12%, down from a previous guidance of 15% to 25%.
Shares of Deliveroo rose 3% on Wednesday following the results.
Share Buyback Program
“So far in 2022, we’ve made good progress executing on our profitability plan, despite increasing consumer headwinds and slowing growth during the period,” Will Shu, CEO of Deliveroo, said in a statement.
“We are confident that in the second half of 2022 and beyond we will see further gains from actions already taken as well as benefits from new initiatives.”
Shu added, “We remain confident in our ability to adjust financially to further changes in the macroeconomic environment.”
The food delivery market has been gripped by the twin challenges of rising inflation and a more responsive consumer.
People are spending more time physically eating out in restaurants than ordering online, while rising costs for energy and essential goods are making shoppers more cautious about parting with their money.
Separately, Deliveroo announced on Wednesday that it would launch its first-ever share buyback programme, buying up to £75m worth of shares from investors. The purpose of the program is to “mitigate dilution from stock-based compensation plans,” Deliveroo said.
The company announced that Simon Wolfson, CEO of British clothing retailer Next, has decided to step down from the board.
“After careful consideration, and with regret, I believe that the time required to continue my role at Deliveroo is no longer compatible with my leadership and other responsibilities,” said Wolfson.
Deliveroo, which recently added McDonald’s to its platform as part of a global partnership, hopes a focus on other areas of on-demand delivery will help it weather the storm of a possible recession. The company has signed non-food retailers such as WH Smith and LloydsPharmacy.
Grocery delivery has long been a tough market with low margins and a lot of competition making it difficult for any individual player to achieve any significant success. While the Covid-19 lockdowns have been a boon for several companies in the industry, the market has seen increased consolidation of late as valuations plummet on falling demand for such services.
Last week, Anglo-Dutch company Just Eat Takeaway.com wrote down the value of its US subsidiary Grubhub by $3 billion, almost half of the $7.3 billion it paid for the company last year. Under pressure from investors to improve its business, the company is considering a sale of Grubhub, among other things.
It comes after Amazon announced a deal to take a stake in Grubhub and add perks for grocery delivery to its Prime membership program. Amazon has similar deals with Deliveroo in the UK, Italy, France and the United Arab Emirates.