Grubhub Pulls 2020 Guidance After NYC Sales Hit; Shares Fall

GrubHub Plans to Reinvest Second-Quarter Earnings in Business

Eric Newcomer

13 Apr 2020, 10:41 PM IST

(Bloomberg) -- If investors were hoping that Americans sheltering in place would be good for food-delivery companies, GrubHub Inc. just threw cold water on that idea, cutting earnings guidance as demand suffered in New York and elsewhere.

The Chicago-based company said it would aim to generate $5 million in adjusted earnings before interest, tax, depreciation and amortization in the second quarter. In doing so, GrubHub seemed to abandon a commitment to generate $100 million in adjusted earnings this year.

GrubHub’s shares fell about 8% to $41.43.

GrubHub said in a release Monday that it would reinvest second-quarter profits “into programs that directly drive more business to our restaurant partners.” Overall, the company estimated that its daily active user growth in the first three months of this year would be “flattish” compared with 2019.

GrubHub -- which has faced tough competition from private food delivery company DoorDash Inc. and ride-hailing company Uber Technologies Inc. -- has positioned itself as a more profitable player in the food delivery market. But the Covid-19 pandemic is undermining even the best-laid plans.

The entire food delivery business is being roiled by closing restaurants and customers deciding to cook their own food rather than risk coming into contact with other people. To spur business, GrubHub is discounting food for diners and reducing or eliminating delivery fees, among other things.

The company said that at the end of March it had $600 million in “liquidity,” which included $175 million that it had added from a credit revolver.

Some experts have cited delivery services as a safe way to get food amid the pandemic. GrubHub Chief Executive Officer Matt Maloney has been more cautious about his company’s current prospects. In a February interview on CNBC, he raised potential challenges. “Do we have a problem with supply of drivers?” he asked. “Do we have a problem with supply of restaurants? Do we have a problem with demand?”