Deliveroo riders
(Picture: AFP via Getty Images)Ocado and Deliveroo both warned today that price rises across the economy are putting a dampener on growth, as businesses feel the squeeze from runaway inflation.
Ocado Retail — an online grocery joint venture between the company and Marks & Spencer — today reported a 5.7% drop in revenue to £564.7 million in the three months to February. Average order sizes fell 14% to £124.
Ocado put the drop down to “euphoria” at the easing of pandemic restrictions, which meant people were choosing to spend less on online groceries and more on going out.
But it warned that uncertainties over inflation and the impact of the invasion of Ukraine may affect growth. It downgraded its forecast for the full-year from growth in the “low teens to around 10%.”
Shares sank on the weaker outlook, dropping more than 7%.
Deliveroo boss Will Shu also sounded a cautious note today as he warned inflation, the loss of stimulus and uncertainty around the war in Ukraine could hamper progress.
The takeaway business said it is likely to grow orders by between 15% and 25% this year, an usually large range that it said “reflects current uncertainties,”.
Shu said: “There are inflationary pressures coming from input costs of food, gas prices, petrol, so we are being cautious in our guidance for 2022.
“We’re trying to be realistic, because we don’t know what’s going to happen.”
Inflation is running at a 30-year high of 5.5% in the UK and is forecast to peak at more than 7% later this year. Knock-on effects from the war in Ukraine mean some economists think inflation could reach 10%.
Shu said: “Food prices are definitely going up, but we don’t control price. I’d also say that a big part of our business - especially in the UK - is groceries, and people do need to eat.
“On the rider side, wage inflation is happening in the UK, but wage inflation has been happening for a year, so it’s not a new thing.”
Deliveroo has not seen any material impact from wage inflation feeding into its costs, but Shu indicated that petrol had become an issue across the wider delivery industry.
David Reynolds at Davy said Deliveroo’s guidance was “more cautious than the market expected perhaps but that clearly reflects a number of headwinds.”
Neil Wilson at Markets.com said: “We are going to see a lot of companies issue tepid guidance due to inflation, cut their profit and margin forecasts because of the rise in input costs & higher interest rates, and of course a bit of Ukraine-war-uncertainty sandbagging is bound to happen.”
Deliveroo’s guidance came as it posted a 57% jump in revenues to £1.824 million for 2021. The value of orders on its platform jumped 67% to £6.6 billion.
Losses widened to £298.2 million, up from £212.6 million a year earlier.
