Just Eat Takeaway has committed to buying back up to €150 million in shares in an effort to appease investors amidst declining orders at Europe’s largest food delivery group. The company reported a 14% decrease in the number of customer orders placed globally in Q1 to 227.8 million, narrowly missing analyst estimates, while gross transaction value, a measure of how much customers spend on the platform, decreased by 8% to €6.67 billion.
The company has been affected by changes in consumer habits, having enjoyed a surge in orders during pandemic lockdowns. Additionally, the food delivery sector has faced growing food prices and customers cutting back on spending due to concerns over the cost of living. In response to these pressures, Just Eat has raised prices and delivery fees and implemented cost-cutting measures. Jitse Groen, the CEO, said that the company had done some “right-sizing” on staff numbers and that the buyback scheme was launched “to improve further future earnings per share.”
Shares in the food delivery group have fallen by almost 40% over the past year as investors have become disenchanted with the company’s performance. Despite the buyback program announcement, Just Eat’s stock fell by 2% in early trading on Wednesday. However, recent changes to Just Eat’s business have seemingly boosted underlying profitability. The company increased its projections for adjusted earnings before interest depreciation and amortisation for this year, expecting growth from €19 million in 2022 to €275 million. Its previous guidance from January forecast growth to €225 million in 2023.
Groen attributed this to changes made to the company’s algorithm, which lowered costs per order, as well as the restructuring of its logistical situation in the UK. In March, the company announced that it was laying off 1,700 couriers throughout the UK after deciding to rely entirely on self-employed riders, a move expected to save money. Groen had previously stated that the gig-economy model “comes at the expense of society and workers themselves” and resulted in “precarious working conditions.”
On Wednesday, he claimed that his U-turn was due to UK laws allowing rivals to hire freelancers, putting Just Eat at a “considerable economic disadvantage compared to the competition.” He added, “We are supportive of better arrangements for employees or workers or freelancers just generally, but, unfortunately, that doesn’t work if you run an uneconomical model as a business. We can’t run a business that is not viable.”
Just last month, the company announced a €4.7 billion write-down on the merger of UK-based Just Eat and Netherlands-headquartered Takeaway.com and the subsequent acquisition of US-based Grubhub. Just Eat has tried to reverse course by seeking to sell Grubhub since April last year but has so far been unsuccessful in finding a full or partial buyer.
Analysts have pointed to upcoming changes to delivery fee caps in New York, which, if lifted, would allow food platforms to charge restaurants more for services and boost the company’s revenues. Silvia Cuneo, an analyst at Deutsche Bank, wrote in a note that the buyback program, which corresponds to 4% of the company’s current market capitalisation, “should reassure on the company’s flexible balance sheet.”
