Food delivery platform Deliveroo (ROO.L) saw its share price plunge after it made a significant cut to forecasts for its gross transaction value in 2022.
The company now sees full-year growth in the range of 4% and 12%, a significant drop from previous forecasts of 15% to 25%, due to a “more cautious economic outlook”.
The news sent shares tumbling 5% at the open, though they have stabilised after the initial drop to trade nearly 3% lower at around 85p per share.
It came as the takeaway delivery group said growth in group sales by gross transaction value (GTV) pared back sharply to 2% on a constant currency basis in the second quarter, down from 12% in the previous three months.
It said the group believes this “reflects the impact of increased consumer headwinds”.
Consumers have been pulling back on discretionary spending, including take-out orders, as they try to make up for the cost of living crisis which has taken a bite out of household finances.
In the UK and Ireland, sales growth dropped to 4% from 12% in the first quarter.
“Management is confident in the company’s ability to adapt financially to a rapidly changing macroeconomic environment, through gross margin improvements, more efficient marketing expenditure and tight cost control,” Deliveroo said.
In its second-quarter trading update, Deliveroo said it had generated £3.6bn ($4.3bn) in GTV during the first half of 2022, up 7% year-on-year.
Deliveroo has been grappling with a volatile share price since listing last year, with shares plunging over 60% this year.
Over £2bn was wiped off the company’s market value on the first day of trading when it first floated back in 2021 in what was widely considered to be on of the worst IPOs in London’s history.
Founded in 2013, the company delivers food from more than 160,000 restaurant partners and 13,000 grocery sites.