Deliveroo Lowers Its Revenue Forecast As UK Consumers Cut Back On Spending

Deliveroo, the British food delivery startup, lowered its full-year sales forecast on Monday, as consumers cut back on spending amid a deteriorating cost-of-living problem.

Deliveroo shares were down 3 per cent at 82.4 pence at 0733 GMT, having lost more than three-quarters of company value since listing at 390 pence in March 2021.

The company, which competes with Just Eat Takeaway.com and Uber Eats, stated that its full-year 2022 gross transaction value (GTV) growth is now forecast to be in the range of 4 per cent to 12 per cent in constant currency, down from 15 per cent to 25 per cent previously.

Deliveroo reported that second-quarter GTV growth dropped to 2 per cent from 12 per cent in the first quarter, falling short of analysts’ estimates.

It attributed this to “the impact of heightened consumer headwinds” in the second quarter.

When COVID-19 lockdowns stimulated demand, GTV increased by 70 per cent in 2021.

Consumer confidence in the United Kingdom fell to a record low last month as the cost of living continues to rise. Wages are failing to keep up with inflation, which reached a more than 40-year high of 9.1 per cent in May and is expected to reach double digits.

Britons are trading down in both stores and items in response to the crisis, shifting from mainstream supermarkets to discounters and from branded to lower-cost private label products.

They are also cutting back on fuel costs as they lower the number of car trips they take, cancelling streaming services, and cancelling household appliance maintenance warranties.

Deliveroo reported a 3 per cent increase in orders year on year in the second quarter, while GTV per order declined slightly due to bigger basket sizes during lockdowns in the same time last year.

The company did, however, maintain its year-end margin target.

It expects the adjusted profits before interest, taxes, depreciation, and amortisation (EBITDA) margin to shrink by 1.5 per cent to 1.8 per cent in 2022, down from 2.0 per cent in 2021.

According to Jefferies analysts, the projection meant a loss of 118 million pounds ($140 million) for the full year.

“Management is confident in the company’s ability to adapt financially to a rapidly changing macroeconomic environment, through gross margin improvements, more efficient marketing expenditure and tight cost control,” Deliveroo said.

In March, it stated that it would break even in around two years as the proportion of revenue spent on marketing in the competitive meal delivery sector decreased.

(Adapted from Reuters.com)

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