Meal delivery company Deliveroo revised its margin growth forecast due to a slower-than-expected recovery in consumer confidence, causing a drop in shares on Thursday that erased a year's worth of gains. Despite this setback, Deliveroo, which competes with Just Eat and Uber Eats, reported its first year of statutory profit and positive cash flow.
Deliveroo posted a profit of £2.9 million ($3.8 million) last year, a significant improvement from the £31.8 million loss in 2023. Core earnings reached the upper end of guidance at £129.6 million. CEO Will Shu expressed surprise at the slower consumer environment recovery and adjusted the target to achieve a 4% core earnings margin by 2026, with potential for further growth.
The company now anticipates accelerated margin growth from 2026, targeting a 4% margin in the medium term. "The consumer market hasn't been the smoothest since our capital markets event," Shu noted.
Shares in Deliveroo fell 9% in early trading, undoing gains of the past year. Jefferies analysts acknowledged the revised margin timeline as a setback but noted that the consensus forecast was already lagging behind the previous timeline.
Shu, who founded Deliveroo 12 years ago, highlighted growth in gross transaction value and order growth in its primary market, Britain and Ireland. He stated that first-quarter trading showed promise, maintaining consistency with the latter part of the previous year.
Focusing on controllable factors such as value and tiered membership programs, Deliveroo aims to sustain growth. After nine years, Deliveroo is exiting the Hong Kong market, selling assets to Delivery Hero's foodpanda, citing market-specific reasons for the withdrawal.
Following the departure from Hong Kong, Deliveroo will operate in seven international markets along with Britain and Ireland. The company had previously reported a 6% increase in gross transaction value in 2024.