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GrubHub Couldn’t Satisfy Wall Street’s Appetite After Gorging on Marketing

February 8, 2017

GrubHub IPOGrubHub IPO
The GrubHub app displayed on an iPhone.Daniel Acker/ Bloomberg via Getty Images

GrubHub reported a quarterly profit that missed analysts’ estimates as its efforts to attract more people to its food order and delivery services drove up marketing costs.

Shares of the company, which faces competition from’s Prime Now (AMZN), Yelp’s Eat24 (YELP), and Uber’s UberEATS, were down 7.5% at $38.21 in morning trading on Wednesday.

On an adjusted basis, the company earned 23 cents per share, missing the average analysts’ estimate of 25 cents per share, according to Thomson Reuters (TRI).

The company’s net income rose to $13.6 million, or 16 cents per share, in the fourth quarter ended Dec. 31, from $11.3 million, or 13 cents per share, a year earlier.

“We are getting better at marketing in general,” Chief Financial Officer Adam DeWitt told Reuters in an interview, and said the company “feels good” about spending money on the marketing side.

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GrubHub’s (GRUB) quarterly sales and marketing expenses rose 19% to $29.6 million.

The company, whose network covers over 1,100 U.S. cities, also forecast revenue of $620 million-$660 million for the full year, slightly lower than estimates of $619.5 million.

The Chicago-based company gave a wider-than-usual range for full-year guidance allowing it to “flex up and flex down” on marketing spend and some other investments to drive additional growth, DeWitt said.

GrubHub’s revenue rose 37.5% to $137.5 million, narrowly beating estimates.

The company, which allows diners to order from more than 45,000 restaurants, said the number of active diners rose 21.2% to 8.2 million. Analysts were expecting 7.99 million active diners, according to market research firm FactSet StreetAccount.