Deliveroo slashes revenue outlook as UK consumers cut spending

LONDON (Reuters) -British food delivery company Deliveroo on Monday slashed its full-year revenue guidance, as consumers trim their spending amid a worsening cost of living crisis.

Shares in Deliveroo, which have lost more than three quarters of their value since listing at 390 pence in March 2021, were down 3% at 82.4 pence at 0733 GMT.

The group, which competes with Just Eat Takeaway.com and Uber Eats, said its full-year 2022 gross transaction value (GTV) growth was now expected to be in the range of 4% to 12% in constant currency versus previous guidance of 15% to 25%.

Deliveroo said second quarter GTV growth slowed to 2% from 12% in the first quarter, missing analysts’ expectations.

It said this reflected “the impact of increased consumer headwinds” during the second quarter.

GTV growth was 70% in 2021 when COVID-19 lockdowns boosted demand.

Confidence levels among Britain’s consumers sank to a record low last month as they struggle with the accelerating cost of living. Wages are failing to keep pace with inflation that hit a more than 40-year high of 9.1% in May and is heading for double digits.

In response to the crisis, Britons are trading down in both stores and products, switching from mainstream supermarkets to discounters and from branded to lower priced private label products.

They are also cutting back on fuel purchases as they reduce the number of car journeys they make, cancelling streaming services and cancelling repair warranties on domestic appliances.

Deliveroo said second quarter growth in orders was 3% year on year, while GTV per order fell slightly year on year, as basket sizes were higher during lockdowns for part of the same quarter last year.

The group did, however, maintain its margin guidance for the year.

It continues to expect 2022 adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) margin to fall by 1.5% to 1.8%, compared with a fall of 2.0% in 2021.

Analysts at Jefferies said the guidance implied a full year loss of 118 million pounds ($140 million).

“Management is confident in the company’s ability to adapt financially to a rapidly changing macroeconomic environment, through gross margin improvements, more efficient marketing expenditure and tight cost control,” Deliveroo said.

It had said in March it would break even in about two years as the proportion of revenue spent on marketing in the competitive food delivery sector falls.

($1 = 0.8402 pounds)

(Reporting by James Davey; editing by Edmund Blair and Jason Neely)