DoorDash
DASH
recently announced its strategic partnership with The Kroger Co. to launch floral and sushi delivery on the DoorDash marketplace from banner stores across the United States.
This partnership with The Kroger Co. is expected to drive DoorDash’s total orders and marketplace gross order volume, and boost e-commerce on its platform.
The deal is part of DoorDash’s strategy to expand its partnerships and build meaningful acquisitions to expand global operations and increase the top line.
Prior to this recent partnership, DoorDash expanded its partnership with companies like Sprouts, EG America, Big Lots, Dick’s Sporting goods, Giant Eagle, Weis Markets and The Raley’s Companies, Sephora and Tractor Supply.
Expanding partnerships and acquisitions have contributed to the company’s top-line growth in previous quarters as DoorDash expanded its operations globally. However, rising inflation and recession in the U.S. market have slowed down the growth drastically, impacting its top-line growth negatively.
DoorDash Looking to Boost Slowing Top-Line Growth With Partnerships
DoorDash’s revenues have been growing rapidly in the past four years. However, the pace of growth has slowed drastically, and the company’s net losses are increasing.
In the fiscal year 2021, the company’s revenues grew 69% compared with 226% in 2020, reflecting the massive slowdown over the year. In the third quarter of 2022, it reported revenues of $4.76 billion, which increased 32.8% on a year-over-year basis.
DoorDash incurred a net loss of $461 million and $468 million in 2020 and 2021, respectively. As of Sep 30, 2022, the company had an accumulated deficit of $2.82 billion.
The acquisition of Wolt contributed to surging operating expenses, which pushed the company toward further loss in the last reported quarter. In the third quarter, adjusted research & development and general and administrative expenses increased drastically, by 97% and 59%, respectively, year over year, driven by growth in headcount and the addition of Wolt.
Rising input costs due to the raging inflation have also been acting as a major headwind for a while. Rising expenses reduced the company’s ability to maintain profitability in the previous quarters, and the trend is expected to continue.
To reduce operating costs, DoorDash recently joined tech giants like
Meta Platforms
META
,
Amazon
AMZN
and
Snap
SNAP
and reduced its corporate headcount by approximately 1250 people, reversing the pandemic-fueled hiring spree.
Meta Platforms went on a hiring spree during the pandemic period, boosted by revenue growth from its ad business to help achieve its metaverse prospects. However, as the company is facing falling revenues due to lower ad spending and a challenging microenvironment, it announced the laying off of more than 11,000 workers or 13% of staff.
Amazon also plans to lay off approximately 10,000 employees after hiring more than 800,000 during the pandemic.
SNAP is also parting ways with 20% of its employees to reduce operating expenses, which have been hurting the company’s profitability.
Though the layoff of DoorDash employees comes as grim news reflecting the poor health of the economy, it would reduce operating expenses and help limit the net losses of the company, which is still enjoying double-digit top-line growth.
DoorDash’s on-demand delivery service is also facing extensive competition from Uber Technologies and Amazon in an extremely fragmented market.
Shares of DoorDash, which currently carries a Zacks Rank #4 (Sell), have slumped 61.1% year to date compared with the Zacks
Internet – Services
industry’s decline of 38%.
You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
DoorDash has been investing strategically in acquisitions of companies like Wolt and Bbot and forming meaningful partnerships to spread operations in the United States and globally. This would help the company to win market share against stiff competition in the extremely fragmented on-demand delivery service industry.
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