Grubhub generates sales in coronavirus pandemic, but not profit

Shares fell 1% to $70

Grubhub Inc. is benefiting from delivery ordering during the coronavirus pandemic but not profiting from it.

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GRUBGRUBHUB INC75.01+0.01+0.01%

The Chicago-based delivery service reported $459 million in sales in its second-quarter ending in June, higher than analysts’ expectations and a 41% increase from the previous year’s period.

The number of diners regularly ordering delivery grew as the pandemic progressed, up 40% year-over-year in June, Grubhub said.

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“The pandemic has been less of a temporary demand spike and more of a permanent catalyst,” Chief Executive Matt Maloney and Chief Financial Officer Adam DeWitt wrote in a shareholder letter Thursday.

A food delivery courier for Grubhub Inc. wears a protective mask in New York on Monday, April 6, 2020. (Jeenah Moon/Bloomberg via Getty Images)

However, Grubhub sacrificed profit to help keep its business running during the pandemic and provide assistance to restaurant partners. The company spent $85 million on coupons, free delivery and advertising to help its sales during uncertain times. It also spent $15 million on safety equipment for its drivers and restaurants.

The chain said its earnings per share adjusted for one-time items fell 17 cents during the quarter.

Shares fell 1% to $70.

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Companies ranging from airlines and manufacturers to retailers are having to spend heavily to operate during the pandemic despite uncertain sales. For restaurants, dine-in limitations have hurt business just as costs are growing.

Food-delivery companies had struggled to turn a profit before the pandemic, fueling competition and consolidation across the sector. Grubhub and Dutch-delivery company Just Eat Takeaway.com NV agreed to combine for $7 billion last month. Grubhub said Thursday that regulators in the U.K. and U.S. had signed off on the merger with Just Eat.

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Uber Technologies Inc. said earlier this month that it would buy rival Postmates Inc. for $2.65 billion, combining it with its Eats division. Grubhub and Uber held talks earlier this year about a potential combination, but they fell through partly on antitrust concerns.

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UBERUBER TECHNOLOGIES INC.32.90-1.81-5.21%

Grubhub, which also operates New York City-based Seamless, said that its corporate business has been hit the hardest as workers haven’t returned to commercial corridors. Orders overall are improving in New York City since the pandemic first depressed its business there, but transactions from Manhattan customers remain down as many residents have moved temporarily, the company said.

The delivery service said it had some of the strongest increases in sales in smaller cities during the quarter. In some of its bigger markets, including New York City, Grubhub and other delivery companies have had to operate with commission caps placed by local officials to try to help restaurants struggling with high administrative fees. Those caps have depressed sales, Grubhub has said.

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Grubhub said it added thousands of chain restaurants to its online marketplace during the quarter, including Burger King, Chipotle Mexican Grill Inc. and McDonald’s Corp. locations. Growth among independent restaurants joining its platform has slowed after a rush of additions earlier in the pandemic, the company said.

Grubhub reported a per-share loss of 49 cents on $45 million in losses. The company is no longer giving guidance because of the pending merger with Just Eat.

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