Delivery Guidance UPDATES
Outside the delivery space, the "Tech Overlords" focus on profitability by slowing growth and reducing headcount. What will DASH do, focus on profitability and slow growth or maintain the status quo?
Deliveroo and Just Eat Takeaway provided updates last week, focusing on profitability and achieving (A)EBITDA breakeven. JET generated €150mm in adjusted EBITDA in the second half of '22 while ROO got to breakeven. Deliveroo saw GMV increase 6% in Q4 despite a 2% drop in orders due to menu inflation, and Takeaway saw a 12% YoY decline in 4Q22 orders combined with a 2% decline in GMV. JET said it had doubled its GMV since the pandemic, whereas $DASH grew by 7x, but DASH doesn't care about profitability. JET also said higher average order values and a reduction of delivery costs per Order, operational efficiencies, hiring freeze, and head office cost reduction contributed to better profitability. The biggest concern for being short DASH is the company getting religious on profitability. Something the company has had no inclination to do in the past.
JET - second-half improvement; several additional cost reduction initiatives; sequential order growth; new profitability guidance w/ improved profitability performance; other operational efficiencies; top-line growth; delivery costs lower in the USA; M&A unlikely; AMZN helped profitability in the USA.
Order Growth - "Of course, it also considers an uncertain macroeconomic environment. Growth in 2023 is expected to be skewed towards the end of the year, given the lower absolute order level of the second half of 2022 versus the first six months of 2022. The long-term objectives of Just Eat Takeaway.com remain unchanged.
Order Growth - "And that's a mathematical thing. It's very unfortunate because, obviously, we would like to show you very high year-on-year growth as well. But that's what you will see in the first half of the year."
Profitability - "We set new profitability guidance for the full year 2023. We will maintain focus on profitability and expect to deliver an adjusted EBITDA of approximately €225 million in 2023. This guidance includes additional investments in food and non-food adjacencies and, like any other company in the current environment, wage cost inflation."
Profitability - "After two years of significant investment, the company returned to profitability earlier than anticipated and generated adjusted EBITDA amounting to approximately €150 million in the second half of 2022. This represents a material improvement from minus €134 million in the first six months of 2022, driven by improved revenue, order delivery cost per order, and overheads – and OpEx."
Profitability - 7-8% Wage growth is hurting profitability - We are now only at 1.1% EBITDA versus the GTV and, of course, our long-term target is over 5%. So, that's something that we are also after, so we need to make those investments.
NO M&A - I think there will be a lot of movement in the relative valuations of businesses. So – but I'm not convinced that there will be a lot of M&A in Europe. You've mentioned specifically Poland and Austria. Both countries, obviously, they're market leaders, so, that, naturally, already makes it quite difficult to be buying other players. And, as you've probably noticed in our results, we're pretty much minded about creating a positive EBITDA. So, the chance that we would be buying loss-making businesses would be relatively slim.
Competition - "I think, generally, everybody in this environment needs to become profitable, and that should mean that the level of competition goes down. And maybe it doesn't go down gradually, maybe it goes down abruptly, like in Holland, where our competitor Deliveroo disappeared, but it should go down. Now, in that environment, what you would expect is that the positions that our competitors have in places in which they are weak go first. It would make no sense for any of our competitors to leave Britain, for instance. That would not make sense. But for competitors to leave Holland or Belgium, that would make sense."
AMZN Helps - "In US, especially the cost per order has gone down. I think the team has done an excellent job of doing it. And we've got some benefits from the commercial agreements with Amazon because they provide us customers in the areas in which we are predominantly weaker. And therefore, the acquisition cost of those customers has gone down quite a bit. But, generally, it's the same sort of things we have done in the rest of the business. And, of course, there's an FX tailwind as well in the conversion to euro."
Deliveroo
Trying to balance growth and profitability, with 2022 focusing on profitability - 2023 will be more of the same
L-T guidance of a 2026 4%+ (A)EBITDA margin comes from gross profit improvement from leveraging consumer fees, incremental advertising business, and efficiencies in the logistics network. Below gross profit will come from marketing efficiencies and leveraging overhead. In 2023, you will see some leverage on the advertising revenue side but less on consumer fees, given the inflation pressures on consumers. Overhead efficiency is can provide some leverage, but the need to invest in the business (i.e., marketing) is important. The bigger question is how much share of the stomach the industry can take, especially in 2023. a disaster scenario would be to spend a bunch of money on advertising in a really weak consumer environment where the ROI is low. Margins improved from negative 3.2% in 2H21 to negative 1.9% in 1H22 to approximately breakeven in 2H22 for consolidated operations. And in 4Q22, GTV was up 6% YoY to £1.8 billion, which suggests sequential growth in Q4, with GTV up 10% in constant currency compared to 3Q.
Chilis's Cutting back on experiments
Focus on the Core
According to Nation's Restaurant News, Chili’s has closed its delivery/carryout location near Southern Methodist University in Dallas. A Brinker International spokesperson said the company is working to strengthen its core Chili’s business and focus on innovation inside its restaurants. In November, the casual chain opened the concept to offer an off-premise menu that included Chili’s favorites like Big Mouth Burgers, fajitas, Chicken Crispers, and the Presidente Margarita. It also offered the virtual brand It’s Just Wings. The closure of Chili’s off-premise store follows a shift in the company’s overall approach to innovation and technology. Last year, the company paused its robotics test with Bear Robotics, in which server robots were deployed at 61 Chili’s restaurants, to focus instead on deploying its “Kitchen of the Future 3” equipment. The company’s Kitchen of the Future initiative includes testing equipment and procedures that could improve cook times, simplify cooking and improve product consistency. This initiative is expected to speed up table turnover and drive higher sales, Brinker CEO Kevin Hochman said during an August earnings call. In addition to Kitchen of the Future 3, the company is “improving our digital properties, perfecting our menu with a focus on our ‘core four’ and delivering a better Team Member and Guest experience. The core four items include Big Mouth Burgers, fajitas, Crispy Chicken Crispers, and hand-shaken margaritas. “With off-premise being one-third of our business or $1 billion annually, we know we have opportunities to refine our To-Go experience and that work is in progress.” Among Chili’s four strategic pillars is hospitality, which encompasses improving the experience for on- and off-premise guests. The company is looking to make jobs easier for servers to spend more time with guests. “We’ve structured our organization to be more deliberate about improving the off-premise experience end to end, removing friction for both guests and team members, and optimizing food quality for takeout and delivery. We believe this focus will accelerate the growth of this important part of our business.”
