DoorDash Sees a Year of Slower Growth as Vaccines Could Sap Delivery Demand -- Update

By Eliot Brown 

DoorDash Inc. prospered as the coronavirus pandemic caused families around the country to turn to the food-delivery company for at-home meals, taking business from rivals Grubhub Inc. and Uber Technologies Inc.

In its first financial report since its initial public offering, the eight-year-old San Francisco company logged $970 million in revenue over the final quarter of 2020, up from nearly $300 million over the same period in 2019. But it said the days of breakneck growth are ending as vaccinations sweep the country and the economy crawls toward reopening, forecasting a major slowdown in new food orders for 2021.

The restrained outlook, paired with a larger-than-expected loss in the quarter and rising costs related to regulation, sent the stock down more than 10% in after-hours trading.

DoorDash said it expects total orders this year to be between $30 billion and $33 billion, an increase of as much as 33% from 2020 -- a more modest pace than the triple-digit-percent growth rate in recent quarters. Analysts expect DoorDash's revenue to flatten or even decline for the first three quarters of the year compared with 2020.

Still, Tony Xu, the company's chief executive, said there are signs that many of the new consumers who came to DoorDash will continue to use the platform far more than before the pandemic.

"I don't think anyone has a crystal ball on this," Mr. Xu said Thursday. "What we tend to see is that once behaviors land for consumers they tend to stick."

Mr. Xu pointed to Australia, where consumers flocked to delivery at the start of the pandemic and kept using DoorDash-like services in surprisingly high numbers as the country reopened.

DoorDash owned the largest slice of the U.S. food-delivery market in January, according to research firm Edison Trends, increasing its share 18 percentage points from a year earlier to 53%.

Its rapid growth has made it an extremely popular stock among investors. Despite having only posted a single profitable quarter in its history, the company's market capitalization stood Thursday at more than $53 billion, making it more valuable than Chipotle Mexican Grill Inc. and Domino's Pizza Inc. combined.

DoorDash, which was valued at $16 billion in a private funding round less than nine months ago, has seen its shares climb more than 60% from its IPO price as of Thursday's close.

Despite DoorDash's gains, the market remains a highly competitive one. After a drop in marketing costs earlier in the pandemic, sales and marketing expenses more than doubled in the last three months of 2020 over the prior year to $347 million. DoorDash reported a loss of $312 million versus a $134 million loss a year earlier.

Other challenges come in the form of regulation. A fall ballot measure in California supported by the food-delivery company gives workers some additional benefits, while caps on commissions that DoorDash can collect on food orders have emerged in some cities in an attempt to aid restaurants.

The caps caused DoorDash a roughly $36 million hit on revenue, the company said, adding that it expects the regulations will effect its earnings throughout 2021. The company said it expects 2021 earnings between zero and $200 million before accounting for taxes, interest and other costs, compared with analyst projections of $246 million.

Rival Grubhub's fourth-quarter loss widened compared with a year earlier as these caps hurt its bottom line, among other things. Uber Eats trimmed its losses in the fourth-quarter.

DoorDash has said it spent millions of dollars to support small restaurants through grants and free marketing during the pandemic. It also waived commissions for restaurants with five or fewer outlets in the initial months of the health crisis.

--Preetika Rana contributed to this article.

Write to Eliot Brown at [e-mail]

(END) Dow Jones Newswires

February 25, 2021 18:53 ET (23:53 GMT)

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