Deliveroo slashes sales forecast as cost of living crisis bites

Deliveroo has cut its annual sales forecast after revealing a fall in demand for takeaways as customers cut back on spending because of the cost of living crisis.

The takeaway delivery group said that growth in total sales by gross transaction value (GTV) plunged from 12% in the first quarter to 2% in the three months to the end of June.

“This is a slowdown in GTV value which management believes reflects the impact of increased consumer headwinds,” the company said in a trading update on Monday.

In the UK, sales growth plunged from 12% to 4% quarter on quarter.

“As the cost-of-living crisis bites with inflation close to double digits, consumer discretionary spending on services like Deliveroo are in the firing line as households look for ways to cut back on spending,” said Victoria Scholar, the head of investment at Interactive Investor.

“There have already been reports that Britons have been cutting back on streaming services such as Netflix and Disney+ while food delivery businesses such as Deliveroo are likely to face a similar decline in demand.”

Deliveroo said it now expects full-year gross transaction value (GTV) growth to be in the range of 4% to 12%, compared with its previous guidance of 15% to 25%.

However, the company kept its outlook for underlying earnings margins unchanged.

“The company is maintaining its adjusted [profit] margin guidance and Deliveroo’s balance sheet remains strong,” the company said. “Management is confident in the company’s ability to adapt financially to a rapidly changing macroeconomic environment, through gross margin improvements, more efficient marketing expenditure and tight cost control.”

In May, Deliveroo was accused of “seeking endorsement for exploitative practices” after signing a deal with the GMB union that does not ensure its couriers will be paid the legal minimum wage throughout their whole working day.

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Under the deal, which recognises its 90,000 riders as “self-employed”, the takeaway group has promised to pay them at least the minimum wage after costs but only while delivering an order,.

However, they are not paid while checked in to the app and waiting for an order, meaning their overall earnings an hour for the time they have set aside for work can fall below the legal minimum level.

Shares in Deliveroo, which have fallen more than 70% since its disastrous flotation on London’s main market last March, fell as much as 5% in early trading on Monday but later recovered to be roughly flat.