Just Eat shares have fallen 11% over the last 4 days after it released it 2016 Full Year Order Update.  Bloomberg reported that growth was easing for Just Eat as the space becomes increasingly crowded.  Amazon joined UberEats and Deliveroo to take market share from Just Eat.

Like for Like year to date order numbers grew at 36% for the year, which is where some of the concern may lie, given that Q3 numbers released in November showed a 34%.  It appears that like for like numbers have fallen consecutively for the last 4 quarters.

Fuller year 2015 figures showed 46% like for like order growth, compared to 36% order growth in 2016, buy Q1 of 2016 had growth of 46%, first half was 40%, and third quarter was 34%.  Just Eat did not release Q4 like for like figures,

Why have Just Eat shares dropped so much

The response of the Just Eat shares is partially because analysts were expecting higher order numbers.  The Telegraph is reporting that growth in the UK was just 31% and that Barclays had calculated an implied shortfall of 400,000 orders of its expectations of 137,000,000 orders.  This is only missing by a very small amount (< .5%), but the stock market can be fickle.  The Groups growth was still 41%, but a portion of this will have been fueled by acquisition.  It has become increasingly difficult to find acquisitions, in fact both Just Eat and Delivery Hero have seen divestments in the last 12 months as they focus on markets that they believe they can build profitable businesses in.

From Just Eats shareholder updates, we can look at what the like for like growth in orders has been.

2015 Full Year     46% 

2016 Q1 46%     First Half  40%   Q3   34%    2016 36% Full Year

 

The stock is still trading at a price to earning ratio of 94, which implies a high level of growth.  Any threat to continued strong order growth will dramatically decrease the P/E ratio and that will occur with a fall in the share price.

Increasing competition

UberEats, and Deliveroo, who are providing logistics for the Restaurants, which is something that Just Eat has only started to look at along with the increasing desire of Restaurants to control their own database whilst cutting commissions paid to Just Eat has created a significant amount of competition for Just Eat.

Many Restaurants are choosing to use Free Restaurant Ordering systems, especially when also providing them with a CRM system to better market themselves.  They are using the savings in commission to fund their ongoing marketing campaigns which some are finding a more effective and allow for higher margin.  This is part of the diversification between price takers using Online Ordering companies like Just Eat and those able to stand out in the crowd with their own marketing and their own email databases.  Some Restaurants have started to believe that they are facing competition from Just Eat and therefore they need to use alternatives to find online ordering customers.

 

The impact of Menulogs performance on Just Eats share price

We expect that the figures from Menulog were significantly below what was expected, especially given the very strong presence of Deliveroo and UberEats in the CBDs of the capital cities.  The Telegraph reported that non UK takeaway businesses caused particular concern, with some estimates that orders had not grown for several quarters.  This will be a significant problem given the high price that Just Eat paid for Menulog just 18 months ago.

We are seeing a strong uptake with UberEats and Deliveroo in the CBDs.   Menulog will not be able to capitalise on Delivery Hero leaving Australia, because we believe that their order numbers were so low that there is very little for Menulog to pick up.

The role of Foodora, owned by Delviery Hero, remains unclear.  It is difficult to see how many orders they are getting becuase of the small numbers of Restaurants getting meaningful order volume from them.

If you Restaurant is struggling with high commissions for online ordering, or your are looking to start building your own customer database, please contact the Restaurant Marketing Team at Marketing4Restaurants.  Our Free booking and ordering systems are now being used in 7 countries as well continue to work with Restaurant owners to help them find new customers and turn them into repeat customers.

 

 

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