DoorDash reported higher-than-expected revenue in the first quarter as strong growth in U.S. grocery orders helped make up for slowing restaurant demand.
But the company's shares fell more than 15% in after-hours trading Wednesday as investors appeared concerned about rising costs.
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DoorDash said its net loss narrowed to $23 million in the first quarter, compared to a loss of $161 million in the same period a year ago. The loss, of 6 cents per share, was higher than the 3-cent loss Wall Street had forecast, according to analysts polled by FactSet.
DoorDash said it increased both marketing expenses and research costs during the quarter. The company, which laid off 1,250 people at the end of 2022, is also hiring again to improve its products, DoorDash Chief Financial Officer Ravi Inukonda said Wednesday during a conference call with investors.
“Our goal is not just to drive strong growth in 2024, but for many years to come,” Inukonda said.
DoorDash also said it expects pretax earnings between $325 million and $425 million in the second quarter. The midpoint of that range — $375 million — is less than the $394 million that analysts are forecasting. Inukonda said he expects pretax earnings to improve in the second half of this year.
The San Francisco-based delivery company said Wednesday its revenue rose 23% to $2.51 billion in the January-March period. That was higher than the $2.45 billion Wall Street was expecting, according to analysts polled by FactSet.
DoorDash said its total orders climbed 21% to 620 million. That also surpassed expectations; analysts were forecasting 607 million orders.
The value of U.S. grocery orders doubled from the same period last year. DoorDash began offering grocery delivery in 2020 and continues to add grocery options. In March, Giant Eagle expanded the number of stores offering same-day DoorDash delivery in Pennsylvania and other states. In April, DoorDash added some West Coast grocers to its offerings, including Haggen and Vallarta Supermarkets.
DoorDash said U.S. restaurant order value also grew, but at a slightly slower pace than last year. DoorDash said its U.S. restaurant business remains healthy, and it saw record order frequency from users during the first quarter, but it's not growing as quickly as newer businesses like grocery.
Still, investors were clearly rattled this week by McDonald’s and Starbucks, which both reported lower store traffic in the most recent quarter as inflation-weary customers in the U.S. and other markets shift from dining out to eating at home.
“I do understand that there are some headwinds that certain merchants face when it comes to in-store traffic,” DoorDash CEO Tony Xu said. “But I think on the digital side, we tend to see pretty strong demand.”
DoorDash said new rules in New York and Seattle establishing minimum wage requirements for delivery drivers has increased prices for consumers, resulting in reduced sales. It estimated that the new rules will result in $110 million in lost sales annually for its merchants in New York and $40 million in lost sales in Seattle.
DoorDash absorbed some of those increased costs in the first quarter but expects those costs to decrease as the year progresses. The company said the rules had a minimal impact on its business, lowering total orders by less than 1% in the first quarter.
Xu said he doesn't expect similar regulations to pass in many other cities, either in the U.S. or abroad.
“I mean, think about the billions of dollars or tens of billions of dollars that you’re adding to the local economic GDP or the fact that you’re offering a service that consumers love and a place where anyone can really earn extra income on their own time,” Xu said. “Who wouldn’t want that? I think most governments think like that.”