City reaction: Deliveroo sees H1 losses widen as consumers tighten belts
Deliveroo has posted widened pre-tax losses after seeing cash-strapped consumers cut back on takeaways as it revealed Next boss Lord Simon Wolfson had quit its board.
The food delivery giant posted a pre-tax loss of £147.3 million for the first half of 2022, against losses of £95.4m a year earlier, just weeks after slashing its annual outlook on the back of slumping sales growth.
In another blow for the group, Deliveroo said non-executive director Lord Wolfson, who is chief executive of high-street chain Next, had stepped down from its board just 18 months after taking on the role.
The businessman, who had joined the group's board in the run-up to its stock market listing, said: "After much consideration, and with regret, I believe that the time required to continue in my role at Deliveroo is no longer compatible with my executive and other commitments."
Deliveroo, whose shares closed up 7.41 per cent at 98p, also announced plans to pull out of the Netherlands, which it said accounted for just 1 per cent of sales by gross transaction value (GTV).
The group saw growth in GTV sales pared back sharply to 2 per cent on a constant currency basis in the second quarter, down from 12 per cent in the previous three months as the cost-of-living crisis starts to hit demand for takeaways. Despite this, it notched up half-year revenues of more than £1 billion for the first time, with turnover 12 per cent higher year on year.
However, last month it downgraded its guidance as it said the slowdown will affect sales over the full year, forecasting annual sales growth of between 4 per cent and 12 per cent, down markedly from the previous 15 per cent to 25 per cent guidance.
Will Shu, founder and chief executive of Deliveroo, said: "We have made good progress delivering on our profitability plan despite increased consumer headwinds and slowing growth during the period. 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."
Joshua Warner, market analyst at City Index, said: "Demand softened in the second quarter compared to the first as consumers became more cost-conscious in the inflationary environment, although Deliveroo said it has continued to gain market share in core markets like the UK, France and Italy, and reiterated its full-year ambitions."
He said the plans to quit the Netherlands "will help Deliveroo as it strives to become profitable at the adjusted underlying earnings level over the coming years".
Victoria Scholar, head of investment at Interactive investor, said: “Stay-at-home stocks like Deliveroo fared extremely well during the pandemic when restaurants and bars were shut and households were forced into lockdown.
"However, the reopening of the economy combined with stiff competition from the likes of Just Eat and Uber Eats and q-commerce players like Gorillas and Go Puff as well as the cost-of-living crisis have created an extremely challenging environment for Deliveroo.”
She added that its initial public offering in London last year was a “PR disaster, detracting investors for buying its shares – its share price has sunk into double digits, trading in a descending path ever since its flotation, with the potential for further losses ahead.”
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