Deliveroo rises after announcing exit from Australia

By Geoffrey Smith

Investing.com -- Deliveroo (LON:ROO) stock rose at the open on Wednesday but failed to hold its gains after the food delivery company said it will end its loss-making efforts to crack the Australian market.

By 03:30 ET (08:30 GMT), Deliveroo stock in London was down 1.2%.

"The Company has determined that it cannot reach a sustainable and profitable scale in Australia without considerable financial investment, and the expected return on such investment is not commensurate with Deliveroo's risk/reward thresholds," the company said in a statement.

In the first half of this year, losses in Australia had shaved some 30 basis points off Deliveroo's basic operating margins, while accounting for only 3% of gross transaction value, which measures the overall orders processed by the group.

The news comes less than a month after Deliveroo said GTV growth this year would be in the lower half of its forecast range of 4-12%, as it focused on lower-risk growth opportunities. As such, it also expects loss before interest, taxes, depreciation, and amortization to be at the narrower end of its forecast range.

Deliveroo's GTV is being flattered by the highest inflation in over 40 years in its core U.K. market, however. The expected GTV gain of 4-8% is well below the rate of inflation, which hit 11.1% in October.

Deliveroo stock is down by more than three-quarters from its 2021 peak but has stabilized in recent weeks even as the economic outlook in the U.K. has worsened. It's up some 30% from its September lows.