Business Maverick

Business Maverick

DoorDash Beats Sales Estimates on Resilient Food-Delivery

The homepage for DoorDash on a laptop computer.

DoorDash Inc. reported first-quarter revenue that beat analysts’ estimates, reflecting the sustained demand in food delivery even as restaurants begin to reopen and more people get vaccinated. The shares jumped about 7% in extended trading.

Sales increased 198% in the three months ended March 31, the company said in a statement Thursday. Revenue totaled $1.1 billion, surpassing Wall Street’s expectations.

That growth came at a cost, however. A net loss of $110 million, or 30 cents a share, was wider than an average of analysts’ estimates compiled by Bloomberg.

The San Francisco-based company benefited from the pandemic-induced boom in food delivery when indoor dining shuttered and people stayed home. DoorDash expanded its market share since the start of the pandemic and now commands 56% of U.S. food-delivery sales as of April, according to research from Bloomberg Second Measure.

DoorDash has increased its footprint in the sector by pushing into categories like grocery and convenience items and through its launch of Storefront, an online ordering product that helps restaurants create their own websites for pickup and delivery.

The strong first-quarter performance exceeded the company’s expectation that consumer engagement would fall as reopenings accelerated, said Chief Financial Officer Prabir Adarkar. International expansion and new categories will be key to maintaining its lead post-pandemic, he said.

Dashing Up

DoorDash shares have fallen almost 50% since a February peak. They are still up about 12% from a high-profile public offering in December that raised $3.37 billion.

Though DoorDash boosted its full-year outlook for gross order value to $35 billion-$38 billion it took a cautious stance. “We expect the combination of summer seasonality, market reopenings, and the waning impact of stimulus to result in some impact to our business in the near term,” the company wrote in a letter to shareholders.

Food-delivery companies have faced mounting scrutiny for squeezing small businesses’ already razor-thin margins by charging commissions that can reach as much as 30% of an order. Cities across the U.S. imposed temporary caps on the fees last year in an effort to aid a restaurant industry reeling from the Covid-19 pandemic.

DoorDash implemented incremental consumer fees in some markets with price controls to help offset the impact to its bottom line. Last month, the company introduced a tiered pricing plan with commissions starting at 15% in an effort to grant restaurants more flexibility. DoorDash said it estimated price controls had a net negative impact of $31 million on revenue, gross profit and adjusted earnings before interest, tax, depreciation and amortization in the first quarter.

The implementation of Proposition 22 in California, which passed in November, has also resulted in higher costs for the company. The new law allows DoorDash to continue to classify its drivers as contract workers as opposed to full-time employees but requires the company to guarantee driver earnings and grant additional benefits.

Despite significant challenges, DoorDash’s market share gain coupled with international expansion could keep supporting growth, according to Bloomberg Intelligence analyst Mandeep Singh. “The company’s newer services, including Drive and Storefront, could help expand its merchant base beyond core food delivery into categories such as grocery, essentials and pharmacy.”

Customers placed 329 million orders in the first quarter, a 219% increase, with the gross value of those orders at $9.9 billion, the company said.

Gallery

Comments - Please in order to comment.

Please peer review 3 community comments before your comment can be posted

X

This article is free to read.

Sign up for free or sign in to continue reading.

Unlike our competitors, we don’t force you to pay to read the news but we do need your email address to make your experience better.


Nearly there! Create a password to finish signing up with us:

Please enter your password or get a sign in link if you’ve forgotten

Open Sesame! Thanks for signing up.

We would like our readers to start paying for Daily Maverick...

…but we are not going to force you to. Over 10 million users come to us each month for the news. We have not put it behind a paywall because the truth should not be a luxury.

Instead we ask our readers who can afford to contribute, even a small amount each month, to do so.

If you appreciate it and want to see us keep going then please consider contributing whatever you can.

Support Daily Maverick→
Payment options

Become a Maverick Insider

This could have been a paywall

On another site this would have been a paywall. Maverick Insider keeps our content free for all.

Become an Insider

Every seed of hope will one day sprout.

South African citizens throughout the country are standing up for our human rights. Stay informed, connected and inspired by our weekly FREE Maverick Citizen newsletter.