Sheer panic in the market
Delivery Hero hits investors in the stomach
02/10/2022 10:27 am
Delivery Hero expects a significant jump in sales this year. Nevertheless, shareholders punish the company’s outlook. As a result, many consider the stock to be inedible. Investments and strong competition are a burden for the company.
Delivery Hero aims to continue strong growth despite competition from reopening restaurants. According to the global food delivery service, sales should increase to between EUR 9.5 billion and EUR 10.5 billion in the current year. That would correspond to an increase of at least 44 percent. Last year, sales increased by 89 percent to 6.6 billion euros. The Dax group had specified a range of 6.4 billion to 6.7 billion euros. In 2020, 2.8 billion euros were taken.
Investors, however, punished the company’s outlook. Shares in the food delivery service fell more than 20 percent to their lowest level in almost two years. The expected losses at Ebitda level are higher than assumed, stated the Berenberg Bank. Investments in the warehouse network, delivery drivers as well as in new markets and takeovers, such as the recent Spanish competitor Glovo, have kept Delivery Hero in the red for years. Business in Asia also grew less strongly in the final quarter than had been hoped, according to Berenberg. In addition, the investments for the Glovo delivery app were higher than expected, said a retailer.
Delivery Hero expands warehouse network worldwide
Delivery Hero basically benefits from the fact that people during the Corona crisis got used to ordering their meals online and having them delivered to their homes. In the meantime, however, Delivery Hero not only wants to provide its customers with restaurant food, but also with groceries and other supermarket items. The expansion of the warehouse network was accelerated for this purpose.
Delivery Hero now operates more than 1,000 warehouses worldwide, but it also has to keep the competition in check. This also includes well-funded startups such as Getir, Flink and Gorillas, which Delivery Hero has invested in over the past year. In order to slowly get out of the red, the group has withdrawn from Germany in view of the high costs and fierce competition from Lieferando owners Just Eat Takeaway, Wolt and Uber Eats and also wants to sell the Japanese business.
The company is on track to achieve positive adjusted operating income (Ebitda) for its platform business — the food delivery business — in 2022, it said. In January, company boss Niklas Östberg announced a turnaround for the entire group: “We want to be in a position in 2023 to be able to break even at group level.” In 2022, the operating profit margin (Ebitda margin) measured by the gross value of goods (GMV) should improve to between minus 1.0 and 1.2 percent after minus 2.2 percent in the past year. The annual report, which will be published on April 28th, should contain more details on the loss actually achieved last year.