Business

Competition is forcing Grubhub to spend heavily on ads

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Social Links for Lisa Fickenscher
Published Feb. 7, 2019, 3:38 p.m. ET

Grubhub, the 500-pound gorilla of restaurant takeout, is getting forced to spend more money than ever to fight off a fast-growing roster of competitors.

Shares of the Chicago-based company, which also owns the Seamless site, tanked on Thursday after it revealed its sales and marketing costs soared 54 percent to a record $69 million.

Grubhub “spent more on marketing than ever before,” to acquire new customers, chief executive and founder Matt Maloney admitted during an earnings call with analysts.

The hefty tab sapped investor confidence in the company, which controls about a third of the restaurant delivery market. Its shares swooned as much as 14 percent on Thursday — shares were down 4 percent in late-afternoon trades at $80.61 — as it missed Wall Street’s expectations on revenues and earnings.

Nipping at its heels are Uber Eats, Doordash, Postmates — which filed for an IPO on Thursday — and Amazon Restaurants.

“An argument can be made that [these companies] have more staying power than anticipated,” DA Davidson analyst Tom Forte said of the smaller competitors.

Grubhub had a net loss of $5.2 million compared with earnings of $53.5 million a year ago.

“The stock reaction today is based on expectations that they would grow faster without spending as much,” ISS-EVA analyst Anthony Campagna told The Post.

Grubhub teamed up with Yum! Brands’ Taco Bell and KFC in the fourth quarter, offering free delivery to Taco Bell customers — a promotion that will cost Grubhub $5 million this year, the company said.

It also invested $10 million in the most recent quarter to expand into new cities, where its seeing more growth than in its more mature markets, Maloney said during the call.

“I don’t worry about market share per se,” he added. “We haven’t seen the ability to grow be hindered because of competition.”

Revenues grew 40 percent to $288 million in the quarter from a year ago.

Grubhub is focusing on partnerships with big restaurant chains, including Dunkin, Maloney added.