By Geoffrey Smith
Investing.com --Deliveroo (LON:ROO) shares fell 2.6% by mid-morning in London on Tuesday, after the food delivery company warned of a tough year ahead.
Deliveroo said that its gross transaction value rose by 11% on the year in the first quarter, on a 16% rise in orders. That was against a tough comparison quarter, given that the first quarter of 2021 saw lengthy lockdowns in all of its major markets, boosting the demand for food delivery.
However, the company's more recent momentum appears to have weakened as lockdowns have eased and restaurants have reopened. The number of monthly average users of its service flatlined from the final quarter of 2021 in the U.K. and Ireland, which account for over half of sales, and the company only posted a minimal increase of 100,000 in the rest of Europe.
Deliveroo repeated the guidance that it gave last month, in expecting gross transaction value to grow by between 15% and 25% this year, adjusted for foreign exchange swings. It still remains far from profitability, however, in a marketplace where it has to compete with the likes of Uber Eats (NYSE:UBER) and, increasingly, Just Eat Takeaway. The company expects its adjusted EBITDA this year to be negative, at between 1.5% and 1.8% of GTV.
The company said its retention rate for its couriers had been "robust" in the first quarter, despite a cost-of-living squeeze that is forcing companies to pay higher wages. Deliveroo didn't break out its staff costs but U.K. data released earlier on Tuesday showed that average earnings including bonuses rose 5.4% on the year in February. Food price inflation, meanwhile, hit 5.1% on the year in March.
Deliveroo shares have lost more than two-thirds of their value since listing in London last year, as investors have turned skeptical about its path to profitability. The stock is currently only 7% above the all-time low it hit in March.