DoorDash cuts 1,250 jobs to control ballooning costs

November 30 (Reuters) – DoorDash Inc. (DASH.N) said on Wednesday it was cutting about 1,250 jobs, or 6% of its total workforce, as the food delivery business seeks to contain costs to cope with a slowdown in demand. DoorDash, launched a hiring spree to meet a flood of orders from people stuck at home at the height of the pandemic, but a sudden drop in demand from inflation-conscious customers left the company struggling with skyrocketing costs.

“We haven’t been as rigorous as we should have been in managing the growth of our team… That’s up to me. As a result, operating expenses have increased rapidly,” the chief executive said. Tony Xu in a note to employees posted on the company’s website. .

“Given how quickly we have been hiring, our operating expenses – if not reduced – would continue to exceed our revenues.”

Shares of the company, which have fallen about 64% this year, were up about 5% in morning trading.

DoorDash, which has delivery partnerships with Walgreens Boots Alliance (WBA.O) and Shake Shack (SHAK.N)has approximately 20,000 employees.

A Doordash delivery man rides a bicycle in the rain during the coronavirus disease (COVID-19) pandemic in the Manhattan borough of New York City, New York, U.S., November 13, 2020. REUTERS/Carlo Allegri/File Photo

“The focus on its cost structure is an encouraging sign, especially given the possibility of consumer spending deteriorating faster than expected,” said CFRA Research analyst Angelo Zino.

Earlier this month, DoorDash reported a bigger-than-expected quarterly net loss of $295 million, raising questions about the growth prospects for delivery businesses as economies reopen.

UK food delivery company Deliveroo (ROO.L) said in late October that sales growth would be at the lower end of its previous forecast.

DoorDash joins a list of American multinationals, including Inc (AMZN.O)Meta Platforms Inc (META.O) and Twitter Inc, which have laid off thousands of employees in recent weeks as they prepare for a possible economic downturn. Read more

While DoorDash’s Xu reiterated that the company has been more resilient compared to other e-commerce companies, he said cutting non-staff operating expenses “won’t close the gap.”

Reporting by Granth Vanaik in Bangalore; Editing by Devika Syamnath and Anil D’Silva

Our standards: The Thomson Reuters Trust Principles.

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