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Deliveroo posted double-digit growth in its first quarter despite benefitting from Covid lockdowns last year, although spend per order fell.

Overall, Deliveroo’s gross transaction value (GTV) increased to £1,79bn, up 11% (12% in constant currency) year-on-year against a comparison base that included lockdown restrictions in many markets.

Growth in orders was 18% year-on-year, exceeding GTV growth, which was partially offset by a reduction in GTV per order of 7% (6% in constant currency), as basket sizes were elevated during lockdowns last year.

Sequentially GTV grew by 3% in constant currency from Q4 in its previous financial year, with orders up 2% and GTV per order of £21.7 that was broadly stable.

In UKI, GTV was £956 million and orders were 40.7 million in Q1 2022. That represented year-on-year GTV growth of 12% in constant currency, below order growth of 20% due to a decrease in average order value. Sequentially and in constant currency, GTV was up 1%, orders were up 1%, and GTV per order was flat.

Deliveroo said that this represented continued strong performance in a competitive environment and against a tough comparison base, reflecting the continued strengthening of Deliveroo’s consumer value proposition in its home market.

In International, GTV was £831m and orders were 41.7 million, representing GTV growth of 11% in constant currency, below order growth of 16% due to a decrease in average order value.

Growth rates were generally stronger in markets in Asia Pacific and the Middle East than in Europe, reflecting the different patterns of COVID-related lockdowns in 2021. Sequentially and in constant currency, international GTV was up 5% in Q1 2022, with orders up 3% and GTV per order up 2%.

Looking forward, Deliveroo’s outlook reflects current uncertainties, particularly across European markets, due to inflationary pressures, post-COVID consumer behaviour, and the broader geopolitical and economic impacts of the conflict in Ukraine.

Nevertheless, it said it remained confident in the company’s ability to adapt financially to a rapidly changing macroeconomic environment, and financial guidance for 2022 is unchanged with 2022 GTV growth expected to be in the range of 15-25% and 2022 adjusted EBITDA expected to be in the range of -1.5% to -1.8% as a percentage of GTV.

Will Shu, founder and CEO of Deliveroo, commented: “Our first quarter performance was in line with the guidance we provided in March. We delivered solid growth of 12% in Q1 2022, against a tough comparison base in Q1 2021, when many of our markets were still experiencing lockdown restrictions.

“I’m delighted that we continued to strengthen our offering for consumers this quarter: we expanded existing relationships in grocery with Waitrose and Carrefour, widened our offer of 12-months free Plus subscription for Amazon Prime members to include France and Italy, and launched a new pilot with WHSmith in the UK. Consumer behaviour may moderate during the year, and this is reflected in our guidance. We remain confident in our ability to adapt financially to any further changes in the macroeconomic environment. We continue to be excited about the opportunity ahead and our ability to capitalise on it.”

Morning update

Retail sales growth slowed in March, partly driven by a drop in food sales, as inflation and weak consumer confidence hit the sector.

BRC-KPMG Retail Sales Monitor for March, covering the five weeks from 27 February to 2 April 2022, found sales increased 3.1% in March against an increase of 13.9% in March 2021.

This is worse than the 3-month average growth of 6.9% and the 12-month average growth of 10.3%.

UK retail sales decreased 0.4% on a like-for-like basis from March 2021, when they had increased 20.3%.

Over the three months to March, food sales decreased 2.6% on a total basis and decreased 3.1% on a like-for-like basis, which is below than the 12-month total average growth of 0.8%.

For the single month of March, food was in decline year-on-year.

Over the three-months to March, Non-Food retail sales increased by 14.9% on a total basis and by 8.6% on a like-for-like basis.

Over the same period in-store sales of non-food items grew 92.9% on a total basis and 74.9% on a like-for-like basis. This was an improvement on the Total 12-month average growth of 69.9%.

On a three-year comparison, over the three months to March, in-store sales of non-food items declined 18.2% on a total basis and 3.9% on a like-for-like basis since pre-pandemic March 2019.

Online non-food sales decreased by 29.0% during March, compared with growth of 64.7% in March 2021, while non-food Online penetration rate decreased to 38.5% in March from 63.0% in March 2021.

BRC CEO Helen Dickinson commented: “As consumer confidence continued to sink, March saw sales slow, and while spend remained above last year this likely reflects higher prices. Beauty and fashion items were popular last month, as consumers took to their town and city centres for some retail therapy in the run up to Mother’s Day. While it is promising to see experiential shopping back in fashion, much in-store retail has not recovered to its pre-pandemic level. Online sales also decreased compared to last year but remain well above 2019 levels due to investment by retailers in their digital offer.

“The rising cost-of-living and the ongoing war in Ukraine has shaken consumer confidence, with expectations of people’s personal finances over the next 12 months reaching depths not seen since the 2008 financial crisis. Furthermore, households are yet to feel the full impact of the recent rise in energy prices and national insurance changes. There is also potential for further supply chain disruption, with China putting key manufacturing and port cities into lockdown. Ultimately, consumers face an enormous challenge this year, and this is likely to be reflected in retail spend in the future.”

Susan Barratt CEO of IGD, commenting on food and drink performance, said: “Food and drink sales struggled in March, partly due to facing strong comparatives to 2021. Not only were sales elevated last year due to lockdown, but Easter was also earlier and we’re yet to see holiday spending ramp up this year.

“It is no surprise that shopper confidence continues to fall and is now lower than the previous low of December 2013 when the horsemeat scandal impacted the food industry. There was a brief peak in confidence when it looked like oil prices might come down, but with 50% of shoppers now expecting food prices to become much more expensive, this optimism was short-lived. These challenges affect shoppers in different ways, with household cutbacks seeing less affluent shoppers skipping meals to save money. This volatile time is set to continue as the reality of the energy price increase, as well as general inflation, hits home for shoppers.”

Elsewhere, baby boomer meal delivery company Parsley Box saw its losses grow and sales growth moderate in a “tough” first full year as a listed company.

Total revenues grew by 4% to £25.5m in the year to 31 December, driven by repeat customer revenue, which grew by 18% to £20.7m.

However, this growth was partially offset by a 31% decline in new customer revenue of £4.7m, with the company instead focussing on minimising disruption to existing customers amid supply chain issues felt across the sector in the second half of the year.

Therefore it reduced customer acquisition marketing, which resulted in a decline in new customer revenue but enabled repeat customer revenue to be maintained.

Repeat customer order numbers grew 15% to 488k showing an increasing loyalty to the brand, while active customers also grew by 8% to 167k.

Marketing expenses grew by 42% to £8.3m, with 60% in the first half and 40% in the second as it reduced marketing spend as stock availability became an issue.

Customer acquisition costs rose by circa 80% year on year and total marketing expenses rose from 24% of revenue in to 33%, prompting an “in depth review of marketing strategy”.

A number of measures have been initiated to improve payback on marketing expenses, with customer acquisition now focused on market segments with the greatest propensity for regular reordering.

These are typically slightly older customers who value the convenience of the product range and the high touch offline service available should they require it.

Adjusted EBITDA loss was £7.1m up from £2.2m in the previous year, excluding IPO costs and share based payments.

The higher loss was largely due to the £2.5m increase in marketing expenses. G&A expenses also rose by £2.4m driven by a 34% increase in employee to support the long term growth of the company, together with the additional costs associated with running a public company.

Post the year end, Parsley Box raised gross proceeds of £6m to facilitate to reinvigorate the business.

“After a challenging 2021, the Board anticipates that 2022 will be the beginning of a new chapter in the group’s development,” it stated.

Stock levels have continued to increase since the year end with more than 95% of product lines now available, delivering good growth in basket size and high service levels.

The group is also focused on implementing the fresh targeted marketing strategy which is already showing early positive signs of acquiring higher spending customers.

Costs are being managed so that adjusted EBITDA losses have reduced to date and are in line with management expectations for the full year.

CEO Kevin Dorren commented: “We have stabilised and improved the business significantly. The new management team members have settled in and with the funding now complete, we are well placed to execute our growth strategy for 2022 and beyond.

“The Parsley Box team comprises experience, commitment, inspiration, creativity, and leadership - the skillset for business growth. We are confident and excited about the future, and the team and I are determined to build on the current stronger foundations to expand and grow.”

Finally, consumer card spending grew 17.7% in March compared to the same period in 2019, as UK consumers took advantage of the sunnier weather and lifting of all remaining Covid restrictions to visit pubs, dine out, and spruce up their wardrobes in preparation for the months ahead.

New figures from Barclaycard show spending on essential items grew 18.1% largely driven by fuel prices and increased supermarket shopping spend (16.9%).

Non-essential spending was up 17.5%, despite rising cost of living and inflationary pressures

Spending at bars, pubs and clubs surged 41.7%, as the lifting of all remaining Covid restrictions saw more Brits flock back to pubs and beer gardens to enjoy the sunny weather, while entertainment grew 20.3%.

However, nine in 10 consumers are concerned about the negative impact of rising household bills on their personal finances, while optimism about the future of the UK economy has fallen to 27%, its lowest level since January last year (24%).

José Carvalho, head of consumer products at Barclaycard, said: “Many sectors saw strong growth in March compared to the same period in 2019, as sunnier weather encouraged Brits to socialise at pubs and bars, book staycations and update their wardrobes for spring and summer.

“However, rising fuel prices and household bills are clearly starting to influence consumer behaviour, with many Brits changing their travel and shopping habits to save money. While this may dampen growth in the months ahead, we shouldn’t overlook the expected heatwave later in April, and the fast-approaching Easter holidays, both of which are likely to boost non-essential spending.”

On the markets this morning, the FTSE 100 is down another 0.8% to 7,556.2pts.

Early fallers include McColl’s, down 3.6% to 2.7p, Greencore, down 3.2% to 123.9p and Deliveroo, down 3% to 106.2p.

Risers include McBride, up 4% to 38.9p, THG, up 3.6% to 93.4p, Glanbia, up 2.5% to €10.38 and Parsley Box, up 1.2% to 20.8p.

Yesterday in the City

The FTSE 100 started the week falling back 0.7% to 7,618.3pts.

Fallers included McColl’s Retail Group, down 12% to 2.8p after last week’s share price jump.

Other fallers included Just Eat Takeaway.com, down 5.3% to 2,540p, Deliveroo, down 4.2% to 109.5p, Bakkavor, down 3.8% to 106.8p, Devro, down 2.1% to 210.5p, Premier Foods, down 1.7% to 123.6p, THG, down 1.7% to 90.2p, C&C Group, down 1.6% to 197.5p and PayPoint, down 1.5% to 575p.

The day’s risers included Nichols, up 7.1% to 1,360p, WH Smith, up 2.7% to 1,485.5p, Glanbia, up 2.5% to €10.38, Sainsbury’s, up 1.8% to 251.1p, Tesco, up 1.4% to 275.2p, McBride, up 1.4% to 37.4p and Pets at Home, up 1.2% to 332.4p.

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