Rising prices and cost of living crisis hit orders but restore profit at Just Eat
Just Eat Takeaway returned to the black earlier than expected in the third quarter, although orders fell sharply as customers reacted to the rising cost of living.
Jitse Groen, the group’s chief executive, said restaurants had put up prices “by a lot”, contributing to a 15 per cent fall in orders in the UK and Ireland. Its operations in southern Europe, Australia and New Zealand dropped by 17 per cent.
He said the company was aware of the tough consumer backdrop and was “trying to ensure that restaurants have a higher number of affordable options” on the menu.
Gross transaction value, or the total value of orders, rose by 2 per cent in the quarter, reflecting the increase in menu prices and positive currency movements. In the UK and Ireland, GTV fell by 5 per cent. Total orders fell by 11 per cent to 235.3 million, while in the UK and Ireland the number fell from 73.6 million to 62.8 million. Just Eat Takeaway noted the ending of Covid restrictions as a reason for the declines.
The company offset the fall in demand by cutting delivery and operating costs, enabling it to beat the earnings guidance issued at the start of the year. It said that its underlying earnings had turned positive in the third quarter on an adjusted basis, “materially ahead of prior guidance at the beginning of the year and on track towards long-term target margins”.
The takeaway group has faced significant turbulence in recent months, particularly in the United States, where orders fell by 13 per cent and GTV by 8 per cent. Under pressure from activist investors, it was forced to put Grubhub, its American business, up for sale only a year after acquiring it. In August Just Eat Takeaway said it had written down the value of Grubhub by €3 billion. It bought the business for about €7.4 billion.
Groen, 44, founded Takeaway in 2000. The group in its present form was created two years ago via a merger with the London-listed Just Eat. It is in the process of selling Just Eat’s 33 per cent stake in iFood, a Brazilian business, to Prosus for up to €1.8 billion in a move that will bolster its balance sheet.
The positive news on profitability lifted the shares by 27¼p, or 2 per cent, to £13.58¾ as analysts suggested that it could prove to be a turning point. David Brohan, at Goodbody, the broker, said profitability should act as “a significant catalyst for the company” and would provide a route to free cashflow. William Woods, at Bernstein, said the update showed “a continuation of the prioritisation of profits over growth”, adding that the softening of order demand had been in what was a seasonally weaker quarter.