Just Eat PLC (LON:JE.) shares took a battering as the takeaway app group forecast £50mln of additional cost to beef up its delivery services.
Completely overshadowing another year of strong revenue and profits growth, Peter Plumb, chief executive, said 2018's underlying profits will between £165mln - £185mln, little changed from 2017 at the bottom end.
READ: Just Eat slides on margin fears as marketing and investment spending climbs
Without the additional spending, however, profits would have been between £215mln and £235mln or a £70mln difference top to bottom.
Expensive delivery charge
Laith Khalaf, senior analyst at Hargreaves Lansdown, added: “Branded outlets, like KFC and Burger King have no delivery capability of their own, so have been missing out on the trend to customers ordering food to be brought to the door.
“New entrants like Deliveroo and Uber Eats have been addressing this market and now Just Eat are following, having conducted trials over the last year."
Neil Wilson, senior market analyst at ETX Capital, said: “One of Just Eat’s big advantages over peers has been that it only handles the ordering side of the transaction, leaving the delivery to the restaurants. It does not face the associated costs with running a low margin delivery network. But it risks ceding this advantage.
“There is a risk of management taking the eye off the ball by focusing on delivery instead of making the most of its status as the go-to platform and primary distribution channel for restaurants.”
SkipTheDishes stands out
Liberum, a buyer with a 935p target price, added: “Revenue growth remains very strong, it has beaten expectations and the decision to invest in delivery looks to have been driven by the excellent performance of its Canadian SkipTheDishes business in delivery.”
Shares fell 11% to 760p.