Shares of Grubhub have fallen 14% this year and 37% over the last 12 months.

The Covid-19 quarantine has become a complex moment for the food delivery business. Meal delivery, once viewed as a luxury, has become a lifeline for restaurants and a critical food supplier for many. It’s an employer of last resort for struggling workers.

Spending on meal delivery services was up 70% year-over-year in the last week of March, according to credit-card data from research firm Second Measure. Americans aren’t just ordering more often. They’re ordering more food, too. In the week ended March 30, the average order size was up 24% from a year ago, by far the biggest increase of the year, and the third straight week with a double-digit percentage increase.

But while investors have been quick to jump on the stay-at-home benefits for companies like Zoom Video Communications (ticker: ZM), Netflix (NFLX), and Amazon.com (AMZN), food delivery isn’t getting the same boost. Shares of Grubhub (GRUB), the industry’s only significant pure-play stock, are still down 14% this year.

As I’ve noted in this column before, food delivery is a tough business. It’s competitive and undifferentiated, with a difficult path to sustainable profits. Grubhub shares have fallen 38% over the last 12 months.

Grubhub, Uber unit Uber Eats, and still-private rivals DoorDash and Postmates are now providing a crucial service for restaurants and diners across the country, but their business prospects haven’t gotten much better.


Part of the reason is the companies are doing more to help keep their restaurant customers in business. Each of the platforms is cutting delivery fees, in particular for small restaurants. Grubhub is deferring commissions for independent restaurants. Postmates is waiving commissions in select cities, including New York, San Francisco, Los Angeles, and Detroit. DoorDash has reduced commissions on independent restaurant deliveries; Uber Eats made a similar move. Both Postmates and DoorDash are expanding their “Essentials” offerings, delivering products from participating pharmacies and convenience stores.

In a recent blog post, DoorDash CEO Tony Xu said driver earnings have jumped $5 per active hour, to more than $22 an hour on average compared with a year ago.

The next read on the health of the food delivery sector comes May 7, when both Grubhub and Uber report their first-quarter earnings. Grubhub recently said first-quarter revenue and profits (based on adjusted Ebitda, or earnings before interest, taxes, depreciation, amortization) will be slightly above its prior guidance and that activity on the platform picked up in April after falling off in late March; the company’s significant exposure to hard-hit New York City hurt business late in the quarter.

There are signs that DoorDash—valued at $13 billion at its last fundraising in November—is outpacing rivals in the current environment. Second Measure data shows DoorDash with 45% of the market in the week ended March 30, up from 39% four weeks earlier.


The gains seem to have come at the expense of Grubhub, which has about 25% of the market, down from 30%. Uber Eats has 21%, and Postmates has 8%. Waitr Holdings , a micro-cap stock, has 2%. DoorDash’s improvement could help the company build its case for going public, but that’s going to take time, given an all-but-frozen market for initial public offerings.

For now, shelter in place, order from your favorite local joint, and give your delivery driver big tips.

Write to Eric J. Savitz at eric.savitz@barrons.com