Image credit: Just Eat Takeaway
Just Eat Takeaway.com, Europe’s biggest meal delivery company, has announced a series of steps to revive its business fortunes. After seeing record orders during the pandemic, the food delivery giant has come under pressure from investors. With its shares having lost two-thirds of its value since October, 2020, CEO Jitse Groen has revealed some drastic moves.
One of the biggest surprises was Just Eat Takeaway.com‘s announcement that it is looking to sell US-based Grubhub less than a year after buying it. Some of the decisions being announced as part of a trading update reflects the industry belief that consumer spending could slow for food delivery companies.
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Just Eat Takeaway.com prepares to offload Grubhub
In 2021, Takeaway acquired Grubhub in a $7.3B deal and Reuters reports that the company has seen a loss to the tune of billion euro. With investors raising questions about the valuation of loss-making technology companies, Grubhub could be sold entirely or continue to run as a partnership.
Grubhub was a prized possession for Just Eat Takeaway.com and its decision to sell in less than a year shows how pandemic beneficiaries are no longer seen favourably by investors. Groen further confirmed that the company has hired bankers to explore a possible sale of Grubhub or a strategic partnership.
There is no certainty on whether this strategic action will be agreed but Groen told reporters that the company is in talks about potential sale. The decision to sell Grubhub comes after Cat Rock, the second largest shareholder of Just Eat Takeaway.com criticised the purchase of Grubhub and has insisted on selling the company.
Despite its strong position in East Coast cities and New York in particular, Grubhub has struggled to boost its profitability partially because of the caps on commission it charges restaurants during the pandemic.
Focus on Gross Transaction Value
Groen and Just Eat Takeaway.com are under increased pressure to increase investor value and it reflects in the trading update. The company revealed that Gross Transaction Value amounted to €7.2B in the first quarter of 2022. This amounts to 4 per cent growth in GTV over the same period of 2021 and this is mainly driven by a higher average transaction value.
The company is also offering guidance wherein it now expects to see mid-single digit growth in Gross Transaction Value this year. It has earlier projected GTV to grow by mid-teens in 2022 and the long-term objective of the company is to add an excess of €30B in GTV over the next five years.
Growth remains challenging in second quarter
In its trading update, Just Eat Takeaway.com also revealed that growth will remain challenging for the company during the second quarter of this year. Despite the challenge, it expects key growth drivers, such as average monthly order frequency and returning customers, to remain above pre-pandemic levels.
The company says it benefitted from a rapidly increasing consumer base in a short period of time during the pandemic. It added more than 20 million active consumers since April, 2020, and is now facing a higher-than-normal absolute churn level. With the European economy opening up, a large percentage of the population is expected to return to dining, which will further hurt the business of platforms like Takeaway.
Increased profitability top priority
For the management, the top priority is to enhance profitability and it aims to do that by focusing on increasing revenue per order. The company also plans to improve its courier costs per order and reduce overheads and operating expenses.
The food delivery giant expects profitability to gradually improve throughout the year and it expects to return to positive adjusted EBITDA in 2023. The 2022 adjusted EBITDA margin, the company expects, to be in the range of minus 0.5 per cent to minus 0.7 per cent of GTV. The long-term adjusted EBITDA margin is expected to be in excess of 5 per cent of GTV.
Strategic partnership with McDonald’s
Last month, Just Eat Takeaway.com announced a long-term global strategic partnership with McDonald’s to expand delivery. The idea of this deal was to improve operational efficiency and enhance its existing local partnership.
The company says it still sees the partnership as a way to “drive operational and efficiency improvements”. It also sees partnership with McDonald’s as a way to bring in additional marketing exposure.
Investor pressure
The actions announced by Just Eat Takeaway.com are clearly an attempt to appease its investors. Apart from Cat Rock, hedge fund Lucerne Capital Management is another vocal critic of the company. While we don’t know the size of its stake, the hedge fund said last week that it will vote against the reappointment of Brent Wissink, CFO of the company, at its shareholder meeting in May.
After peaking above 100 in October, 2020, Just Eat Takeaway.com’s shareholders have seen its value erode by two-thirds and is only marginally above its 2016 IPO price. Investors around the globe are becoming critical of tech companies with huge churn but little to show in value. Just Eat Takeaway.com is one of the major players in the meal delivery space to face the wrath of investors.
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