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Increased competition in the food delivery space appears to be eating away at GrubHub's profits, according to financial information released Tuesday. In an effort to change that, GrubHub is expanding its reach and will be acquiring LAbite, a Los Angeles-based food delivery service, for approximately $65 million.
GrubHub's growth has slowed considerably in recent months, likely due to increased competition from other food-delivery services. The company saw just a 27 percent year-over-year increase in revenue growth in the first quarter of 2016, for instance, compared to growth of 49 percent in the first quarter of 2014.
The LAbite acquisition is one of many for GrubHub, which has so far acquired Seamless, Delivered Dish, DiningIn.com, FanGo Software Systems, and Dotmenu. Last year, GrubHub expanded its offerings by adding its own fleet of delivery drivers (rather than relying on local restaurants to deliver food themselves). Still, the company faces competition from a number of others moving into the food-delivery space, including Uber and Amazon.
The acquisition of LAbite is meant to expand the company's growth. "With more than 5,000 restaurants now using GrubHub delivery and our total network comprised of more than 44,000 restaurants, we are making great progress towards fulfilling our goal of being the most comprehensive marketplace for takeout diners and restaurants," said Maloney.
Despite seeing a 27 percent year-over-year increase in revenue growth in the first quarter of 2016, the company reported a six percent decrease in income. Perhaps unsurprisingly, stock (NYSE: GRUB) was down after the news.
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In an earnings call with analysts Tuesday, CEO Matt Maloney said the company generated $713 million in gross food sales during the quarter.
Among the key highlights of the release: The number of active diners using GrubHub grew to 6.97 million, a 24 percent year-over-year increase from the first quarter of 2015. Daily average "Grubs" (i.e. revenue-generating orders) grew 14 percent from the first quarter of 2015 and gross food sales increased 21 percent.
