Just Eat Takeaways results show just how much the Covid-19 pandemic has boosted the food delivery sector.
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Strict lockdown measures to contain the spread of Covid-19 in Europe helped JustEat Takeaway.com’s growth accelerate dramatically in the final quarter of 2020—especially in the key U.K. market, where it has doubled down on increasing its footprint.
But shares in the company fell 4.5% in London trading, as investors eyed full-year guidance indicating smaller-than-expected margins.
The back story. The onset of the Covid-19 pandemic has proved to be rocket fuel for the food-delivery sector. With millions of people housebound, Just Eat Takeaway—formed out of the merger between the Danish JustEat and Dutch Takeaway.com early last year—turned its strategy in 2020 to expansion.
A constituent of London’s FTSE 100 index, the Amsterdam-based company announced in June that it would buy U.S. food delivery giant Grubhub for $7.3 billion, creating the world’s largest food-delivery group outside of China. The deal, which Just Eat Takeaway said has gained both regulatory and shareholder approval, is expected to be completed in the first half of this year.
It has also looked to grow its share of the key U.K. market. The group invested heavily in marketing, doubled its British sales force, and began expanding its own logistics network. Just Eat Takeaway previously relied on restaurants that could deliver food themselves, but is now building out its own delivery system to match competitors like UberEats and Deliveroo.
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What’s new. Just Eat Takeaway said on Wednesday that total orders in the fourth quarter of 2020 grew by 57% from 2019 levels, to around 180 million orders. The company reported 588 million orders through the full year, representing growth of 39% compared with 2019.
Delivery orders surged even more, up 163% in the fourth quarter, with the U.K. by far leading the way with delivery of 387% more orders than during the same period in 2019.
“The progress in the U.K. is particularly exciting,” said Jitse Groen, the group’s chief executive. “In 2021, we will continue to invest in price leadership, improving our service levels and expanding our offering to restaurants and consumers.”
The company said it expects revenue for the full year to be between €2.38 billion and €2.4 billion ($2.9 billion to $2.92 billion). The margin for adjusted earnings before interest, taxes, depreciation, and amortization (Ebitda) is expected to be 10%.
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Looking ahead. Just Eat Takeaway’s results show just how much the Covid-19 pandemic has boosted the food-delivery sector. That was expected, and likely priced into the stock, which climbed more than 16% from mid December 2020 to early January 2021.
The real takeaway is how much the company’s bet in the U.K. has paid off: 35% growth in orders across the whole year with staggering 387% delivery order growth in the fourth quarter. London is one of the most important European markets for food delivery, and Just Eat Takeaway is clearly ramping up for a fight against the likes of UberEats and Deliveroo.
But expanding into doing delivery yourself comes at a cost, and today’s stock slide is likely the result of investors getting nervous about management’s guidance on margins. The expected 10% adjusted Ebitda margin is lower than expected, and it is the direct result of pouring money into expanding the delivery network.
