Just Eat surges 15% over 2023 profit outlook

Swinging to a profitable second half after a loss in the first half of 2022, the largest European food delivery company sees a promising 2023. With a new partnership with Sainsbury’s effective from February and stronger performance expected towards the end of this year, investors seem bullish.

- Just Eat’s share price jumped 15% in early morning trading after the company reported a profitable second half of 2022.

- The company forecasts a 2023 profit spike despite a 12% slowdown in fourth-quarter 2022 sales.

- Just Eat is teaming up with Sainsbury’s to begin grocery deliveries in three UK cities from February.

Strong outlook for 2023 despite sales miss

Europe’s largest online food delivery company, Just Eat Takeaway.com [JET], bounced back from a disappointing start to 2022, with its shares surging as much as 15% in early morning trading after the company swung back to profitability in the second half of 2022 and indicated a strong profit forecast for 2023 in a trading update on Wednesday.

The improved profitability came despite an overall 12% drop in sales for the fourth quarter to 239.8 million and a 10% decrease in the UK and Ireland, to 65.4 million. The sales slowdown was worse than expected and is indicative of the cost-of-living crisis. Consumer spending took a hit as inflation soared, resulting in a downturn in the online food delivery industry. The sector is returning to normal patterns after a pandemic-induced boom in demand over 2020 and 2021, while most were confined to their homes.

Adjusted EBITDA came to €150m in the second half of fiscal year 2022, swinging back from the first half’s €134m loss. The Dutch UK-listed company’s full-year adjusted EBITDA came to about €16m in 2022 from negative €350m in 2021. Improvements in revenue per order, delivery costs per order, overheads and operating expenditure helped to boost the year’s performance.

Grocery delivery partnership with Sainsbury's

“Our improved profitability and strong capital position strengthen our business for further growth and underpin our ability to both deliver on our Adjusted EBITDA targets and invest in food and non-food adjacencies,” Just Eat’s CEO Jitse Groen said about the results. Most of the forecasted growth for 2023 is expected to reflect towards the end of the year, given the second half’s lower absolute order level compared to the first half, the company said.

This week, Just Eat partnered with supermarket chain Sainsbury’s [SBRY] to offer home delivery and distribution services for groceries from 175 stores across London, Edinburgh, and Bristol. The service will begin from end-February, offering a selection of 3,000 products delivered within 30 minutes. Just Eat works with instant delivery peer Getir and has earlier established relationships with Asda and Co-op for grocery deliveries.

Similar to hot meal deliveries, demand for grocery deliveries boomed during the pandemic as general mobility was limited. However, it has since seen a decline as households turn to picking up items themselves as life returns to normal. There has also been an increasing trend towards saving amid recession fears, high inflation, and layoffs.

Funds in Focus: Amplify Online Retail ETF, ProShares Online Retail ETF

Further pushing Just Eat’s share price, the company holds a majority “buy” rating from analysts, according to MarketWatch data. Out of the 20 analysts polled, 11 rated “buy”, and eight held a “hold” rating.

The Amplify Online Retail ETF [IBUY] offers exposure to a variety of some of the largest disruptive innovators within the ecommerce industry. It includes a 1.38% holding of Just Eat. The fund was up 13.86% in the last month but down 41.13% in the last year.

The ProShares Online Retail ETF [ONLN] also provides exposure to major retail ecommerce companies, including Just Eat’s competitor, DoorDash Inc. [DASH], amongst its top ten holdings. The fund is up 12.63% in the last month but down 36.54% year-over-year.