DoorDash to cut jobs by 6% to stem losses

CEO: Covid-era growth too expensive

DoorDash is cutting about 1,250 jobs to rein in expenses, acknowledging that a rapid expansion during the covid-19 pandemic has led to mounting losses.

“While our business continues to grow fast, given how quickly we hired, our operating expenses — if left unabated — would continue to outgrow our revenue,” CEO Tony Xu wrote in a letter to staff Wednesday.

The cuts affect about 6% of the company’s workforce, a mix of U.S. and non-U.S. based staff, according to people familiar with the matter asking not to be identified, as the announcement was not yet public. By scaling back headcount, DoorDash aims to curb operating expenses, which topped $2 billion in the third quarter, largely because of stock-based compensation and the absorption of Wolt, the Finnish fooddelivery company DoorDash acquired last year.

DoorDash’s net losses have more than doubled over the past year, increasing every quarter to $296 million by the end of September, compared with a loss of $101 million a year ago. The company reported adjusted earnings before interest, taxes, depreciation and amortization of $87 million in the third quarter. That metric strips out expenses like stock-based compensation or nonrecurring costs that executives deem to be outside the scope of operations.

Shares of DoorDash Inc. jumped 4.4% as the market opened in New York, closing 9% higher by the market close at $58.25.

The San Francisco-based company is the latest tech firm to cut jobs amid higher interest rates and slowing economic growth. But unlike other companies seeing less consumer demand from rising inflation, DoorDash’s order volumes have remained resilient, growing 27% in the third quarter compared with last year and boosting revenue to $1.7 billion.

The pandemic supercharged consumers’ affinity for takeout when coronavirus lockdowns shuttered indoor dining. DoorDash increased its share of the meal delivery market in the United States and garnered 56% of food delivery sales as of September, according to YipitData.

But the growth has also come at a cost. Competition in the sector has only intensified, and the company has spent heavily to sustain growth by expanding its footprint in nonrestaurant categories such as convenience store items, groceries and alcohol. Last year DoorDash acquired Wolt in an all-stock deal valued at about $8 billion to increase its international presence.