Just Eat CEO Quits Without Delivering the Takeaway

(Bloomberg Opinion) -- Peter Plumb is stepping down as CEO of takeaway app Just Eat Plc before he could deliver the one dish investors actually wanted: results from his big change in strategy.

It’s less than 10 months since Plumb announced that Just Eat would build up its own army of couriers – rather than leaving restaurants to make deliveries. His argument was that to win business from outlets unwilling to meet the cost of delivery drivers, Just Eat would need to provide them itself. That pivot required heavy investment and spooked shareholders; the stock has since fallen by almost a quarter.

Plumb’s abrupt departure after just 16 months in the job will inevitably raise concern among investors that the plan may not be working. The risk is that his successor, rather than reviewing the strategy, will simply be tempted to ramp up the investment. If that does happen, Just Eat does have some options to feed its appetite for capital – but they aren’t particularly appetizing.

Firstly, it could sell its minority stake in Brazilian startup iFood, which activist Cat Rock Capital Management LP has said could generate 650 million pounds ($837 million). Some of that could be returned to shareholders – but it would also be a tempting war-chest for investment.

Secondly, the company had net debt of just 6.8 million pounds at the end of the first half. So it has scope to increase borrowings to add couriers or make acquisitions.

But the danger is that the spending on building a delivery network continues to escalate – imperiling Just Eat’s already vulnerable margins. The lesson from online retail is that while sales growth may be well ahead of bricks and mortar peers, investment ratchets up too.

The company sought to allay those concerns on Monday. It now expects full-year revenue will at the top end of analyst estimates at 780 million pounds. Underlying Ebitda will be about 173 million pounds – at the low end of expectations, but still within the previous range.

Plumb has left at a delicate time. With rival Deliveroo the subject of takeover interest from Uber Technologies Inc. last year, his successor faces the potential of much more muscular competition. Investors may well hope that without a CEO and in a consolidating market, Just Eat becomes an appetizer for a rival.

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.

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