Food-delivery profits remain elusive

News that Just Eat intends to delist from the United States isn’t an indication that the European food delivery giant intends to immediately sell GrubHub, the U.S. company it bought back in 2020. Instead, Just Eat’s CEO said, the move is focused on cost-cutting. The value of Just Eat’s U.S. shares — listed on the Nasdaq — has fallen from over $22 per share in 2021 to around $8.50 this morning, a huge reduction in worth.

The Just Eat retreat was not the only hard event to hit the on-demand market, which has seen former startups struggle once they reach the public markets. Delivery Hero is another example of the trend; its value fell sharply last week after its 2022 guidance proved a flop. (The Exchange recently dug into Delivery Hero’s appetite for Spanish delivery company Glovo.)

From a share price of around €130 last year, Delivery Hero has seen its value fall to around €41 per share. The company’s CEO actually apologized for his company’s declining value on Twitter, which felt rather human of him — in a good way, mind.

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U.K.-based Deliveroo has suffered since its IPO last year, losing about 65% of its value, measured from its trailing 52-week high.

And there’s more bad news domestically thanks to DoorDash’s falling value.

Given all that, you might think that investors would be pulling back on investment into the delivery space. And yet, we’ve seen capital pile into the delivery market even faster in recent quarters, thanks to startup enthusiasm to bring consumers goods and groceries in even faster time frames.

There’s a yawning gap between what public-market investors are saying about delivery companies and what private-market investors are hoping for the next crop of public companies from the space. Let’s tease apart what each group is saying and what it means for a host of startup wagers.

Growth concerns, profit matters

In reverse order of occurrence, let’s start with Just Eat Takeaway.com, as it is formally known. Its CEO, Jitse Groen, told a Dutch television program that his company’s decision to give up its U.S. listing in favor of its European listing is a “cost reduction measure.” The company, Reuters reports, has “come under pressure from shareholders to sell the unit.”

The latest data we have from Just Eat is a January document detailing 33% order growth in 2021 and a 14% year-on-year expansion in orders in Q4 2021. Gross transaction volume (GTV) rose 31% in 2021 compared to 2020, but just 17% year on year in Q4.

Notably, Just Eat also said that its “adjusted EBITDA margin improved substantially in the fourth quarter of 2021,” allowing it to hit the “midpoint of [its] guided range of minus 1% and minus 1.5% of GTV,” per the document.

Growth, then, was low-30s for the company in 2021, with about half that growth rate in the final quarter, albeit with rising profitability that’s just a little negative on a heavily adjusted basis. By more traditional accounting methods, Just Eat is likely losing a packet, once costs like share-based compensation and other expenses are included in its bottom line.

Our read? Slowing growth and persistent losses are not a great mix.