GrubHub profit misses estimates as costs soar

Reuters News
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Posted: May 04, 2015 12:50 PM

By Subrat Patnaik

(Reuters) - (This story has been refiled to correct paragraph 6 of story dated April 29 to change brokerage name to Sterne Agee CRT, from Sterne Agee. The headline and paragraph 1 were corrected earlier to remove reference to analysts' profit estimates as they were not comparable)

GrubHub Inc's quarterly profit missed market estimates as the online food order company spends heavily to build its food-delivery network.

GrubHub shares, which have soared 72 percent since their market debut last April, fell as much as 10 percent in morning trading on Wednesday.

The company, which started delivering food directly to diners with the acquisition of DiningIn and Restaurants on the Run, said total costs and expenses jumped 38.5 percent to $69.8 million in the first quarter ended March 31.

"We are going to continue to invest aggressively in the delivery opportunity," Chief Executive Matt Maloney told Reuters.

The company has aggressively bought smaller rivals over the last few years. It bought Seamless last year, to boost its presence in the U.S. East Coast. Seamless is popular with large businesses, which order food for employees working long hours.

"GrubHub has a strong moat but competition from larger players such as Amazon, Uber, Google and others could affect the company's future growth prospects," Sterne Agee analysts wrote in a research note.

The company, which delivers everything from expensive steaks to bento boxes, receives a commission from restaurants on orders booked through its website and its mobile application.

GrubHub said it expects revenue of $83.5 million-$85.5 million for the second quarter.

Analysts on average were expecting $83.7 million, according to Thomson Reuters I/B/E/S.

First-quarter revenue increased to $88.2 million from $58.6 million. The number of active diners using GrubHub's services jumped about 46 percent to 5.6 million.

Net income attributable to common shareholders rose to $10.6 million, or 12 cents per share, from $4.4 million, or 6 cents per share, a year earlier.

Analysts had expected a profit of 14 cents per share on revenue of $85.4 million.

GrubHub shares were down 4.7 percent at $43.17 on the New York Stock Exchange on Wednesday morning after touching a low of $40.78.

(Additional reporting by Lehar Maan in Bengaluru; Editing by Saumyadeb Chakrabarty and Joyjeet Das)