Just Eat Shares Soar as Online Takeout Service Lifts Outlookby
Increased commission rate will provide additional profit boost
Order growth provides contrast with Restaurant Group struggles
Just Eat Plc shares soared after the company said an increase in the commission it charges U.K. restaurants for its online takeout service will give an additional boost to full-year sales and profit.
The stock gained as much as 9.8 percent to 421 pence, boosting the company’s market value to about 2.8 billion pounds ($4.1 billion).
Last month, Just Eat increased the commission rate it charges restaurants in the U.K. to 13 percent from 12 percent. The company is benefiting as more consumers order takeout food for home delivery rather than dine out. Total orders rose to 31.5 million in the first quarter, up 41 percent on a so-called like-for-like basis. The growth is in contrast to Restaurant Group Plc, owner of the Frankie & Benny’s chain, which on Friday forecast another hit to profits amid deteriorating sales.
“We understand the step up in guidance reflects only the U.K. commission rate increase, there is no shift in order growth expectations,” David Reynolds, an analyst at Jefferies, said in a note. The growth in orders was “very impressive” and the revised guidance looks conservative, he said.
“We have had an excellent start to 2016,” Just Eat Chief Executive Officer David Buttress said in a statement. “We are well positioned to continue benefiting from channel shift in the category.”
The company now expects full-year revenue of 358 million pounds, up from a previous forecast of 350 million pounds. Underlying earnings before interest, tax, depreciation and amortization are seen in a range of 102 million pounds to 104 million pounds, up from the prior guidance of 98 million to 100 million pounds.
Just Eat charges restaurants a commission when a customer places a takeout or delivery order through its website. The London-based company counts 14.2 million active users and has partnered with more than 64,000 restaurants.