Grubhub is winning the food delivery wars

Grubhub knows how to deliver food...and big profits.Shares of the online delivery company, which also owns Sea...

Posted: Jul 25, 2018 8:51 PM
Updated: Jul 25, 2018 8:51 PM

Grubhub knows how to deliver food...and big profits.

Shares of the online delivery company, which also owns Seamless, soared Wednesday thanks to strong earnings. Grubhub stock surged nearly 25% to a new record high.

Despite competition from the likes of DoorDash, Uber Eats and even the formidable Amazon, GrubHub continues to wow investors with its impressive growth. Sales were up more than 50% in the second quarter and earnings more than doubled.

Grubhub is also partnering with more big national restaurant chains as well as local eateries. The company announced a deal with KFC, Taco Bell and Pizza Hut owner Yum! Brands earlier this year. Yum! bought a stake in Grubhub.

Grubhub may soon be able to add more chains following its acquisition of mobile technology company LevelUp, which was also announced Wednesday.

LevelUp helps restaurants develop digital payment services and customer loyalty programs. Bareburger, Chop't and Potbell are some of LevelUp's more than 200 clients.

Grubhub CEO Matthew Maloney told analysts during a conference call Wednesday that LevelUp's restaurant relationships were a key reason why GrubHub decided to buy LevelUp for $390 million.

Related: IHOP says it's still about pancakes, does delivery deal with DoorDash

It's all part of Grubhub's strategy to get a bigger piece of the delivery pie -- particularly with younger Millennial consumers. That's why Grubhub also started accepting Venmo as a form of payment in the app earlier this year.

The company continues to add new markets for its delivery services as well. Grubhub recently expanded into Santa Barbara, Reno, Scranton and Spokane, for example.

These cities may not be as big as some of the ones that Grubhub already has a major presence in, such as New York, Chicago, Los Angeles and San Francisco.

But Grubhub chief financial officer Adam DeWitt told analysts during the conference call that entering more smaller markets is an important part of the company's strategy -- especially since the industry remains pretty fragmented.

"The key thing to remember is that even though they're smaller, there's a lot of room for growth from where we are today," DeWitt said.

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