GrubHub Plunges Most in 3 Years After Forecast Misses Estimates

(Bloomberg) -- GrubHub Inc. fell the most in more than three years after the food-delivery service gave a forecast for earnings in the current period that missed analysts’ estimates as the company spends heavily to compete with formidable rivals.

GrubHub said adjusted earnings before interest, taxes, depreciation and amortization would be $40 million to $50 million in the first quarter, below the lowest estimate of analysts tracked by Bloomberg. In the fourth quarter, revenue and adjusted Ebitda also missed forecasts. The shares tumbled as much as 21 percent, to $66.62, the biggest drop since October 2015.

Private competitors have been aggressively muscling in on GrubHub’s turf, with companies like DoorDash Inc. and Postmates raising hundreds of millions of dollars from investors. Meanwhile, Uber Technologies Inc. sees its food delivery service as a key piece of its growth story as it prepares for a public offering later this year.

To respond to such competition, GrubHub has been adjusting its business model. Traditionally, Chicago-based GrubHub relied on restaurants’ own couriers to get food to customers. But a new generation of startups created fleets of drivers to manage delivery themselves. So GrubHub has been building out its own network of delivery couriers. While that’s an important strategy to defend its market share, it also threatens margins.

To contact the reporters on this story: Krista Gmelich in New York at kgmelich1@bloomberg.net;Eric Newcomer in San Francisco at enewcomer@bloomberg.net

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Molly Schuetz

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