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Why Grubhub's Stock Was Down 12.5% Today

By Rich Duprey – May 7, 2020 at 4:17PM

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The food delivery specialist saw business in key markets take a hard hit because of the pandemic.

What happened

Grubhub (GRUB) stock fell sharply on Thursday after a first-quarter earnings report that failed to produce the expected gains from the coronavirus pandemic.

So what

Although food delivery turned out to be a lifeline that has kept many restaurants afloat, New York is Grubhub's biggest market for both consumers and corporate orders, and is also the epicenter of the pandemic. Its business there suffered greatly, with restaurant partner business plunging 50% from pre-crisis levels, while other Tier 1 cities saw a 10% to 25% decline. Tier 2 and Tier 3 cities fared better, only losing 10% of their business.

Woman with Grubhub delivery bag.

Image source: Grubhub.

While Grubhub had been growing prior to the outbreak, it noted the last two weeks of March resulted in orders tumbling by double-digit rates.

Now what

Grubhub said "active diners" jumped 24% to 23.9 million while "daily active grubs," a metric it uses to identify its daily users, declined 1% to 516,000. Gross food sales rose 8% to $1.6 billion.

However, according to a statement by founder and CEO Matt Maloney, the food delivery company will be using all of its profits in the second quarter to support its restaurant partners "to generate as many additional orders for our restaurant partners as possible. We hope that the darkest days are behind our restaurant partners and they can start focusing on the recovery."

Grubhub's stock was tumbling 12.5% heading into the market's close.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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