Growth Wanes at Instacart, Gopuff

But Instacart reported that profit improved by trimming costs and improving delivery processes. It pulled in about $125 million in net income, based on generally accepted accounting principles, for the quarter, one of the people said. The amount of income it generated before interest, taxes, depreciation, amortization and share-based compensation, or adjusted Ebitda, increased by roughly one-quarter, or tens of millions of dollars, from the prior quarter, to roughly $170 million.

Gopuff offered a similarly mixed picture recently. Its first-quarter revenue didn’t grow at all from the same period last year, and the number of orders only ticked up slightly, a person familiar with the matter said. The company reduced how much money it was losing, but still was burning cash, the person said. Its adjusted Ebitda loss improved by about 60% in the first quarter, compared to the same period the previous year, another person familiar with the matter said. More precise figures couldn’t be learned.

YipitData, an analytics provider with access to samples of shoppers’ credit card transactions and email receipts, showed Gopuff’s sales declined in the first quarter, compared with the same period last year, according to an analysis it provided to The Information. The data doesn’t include sales by Gopuff liquor store subsidiary Bevmo, which makes up a significant chunk of its sales.

The firms’ quarterly results haven’t been previously reported. The Information previously reported Instacart’s growth had slowed.

The growth slowdowns in the first quarter are a stark contrast from its results last year. Instacart’s gross sales increased by 16% last year, compared to 2021. Gopuff’s delivery revenue globally grew about 50% last year, after tripling the prior year, a person familiar with the matter said.

The delivery firms can take some cover from a tough comparison to last year’s first quarter, when pandemic variants kept some consumers at home and boosted their businesses. But the slowdowns may also be a reminder that the firms’ post-pandemic growth spurts didn’t mean that all those customers stuck around.

The delivery companies are also examples of the kind of problem a broader rash of mature startups are facing, as once-rapid growth sputters before they can get to the public markets. Instacart has been particularly closely watched as one of the few venture-backed firms likely to go public in the near future.

A horde of other highly valued private companies have faced stark slowdowns recently, too, including financial tech firms Stripe and Chime, The Information previously reported. Venture capitalists say that across their portfolios, with few exceptions, companies are reporting slowing growth that they haven’t faced previously.

The slowdowns often are exacerbated by cost-cutting measures in the name of getting profitable, such as cutting marketing, promotions or new product development. The measures, in place for nearly 18 months, were a reversal from a growth-at-all-costs mentality enabled by a long period of near-zero interest rates. Rate hikes sent companies in search of steady cash flows, but sometimes at a serious cost to growth. Higher growth had helped justify previously soaring valuations.

In 2021, a boom year, Instacart and Gopuff raised money at $39 billion and $15 billion valuations, respectively, after seeing stunning, pandemic-driven growth. Instacart recently marked down its own valuation to $12 billion. Caplight, a platform for private stock trades, estimates Gopuff’s current valuation at $4.2 billion.

The delivery firms’ publicly traded quasi-competitors, DoorDash and Uber, have reported faster growth in the first quarter. The gross transaction volume of firms’ delivery services, which focus largely on restaurant delivery, grew by 29% and 12%, respectively, last quarter.

For the privately held delivery firms, broader factors are also likely at play. Instacart has told investors that its growth numbers were dragged down by an unfavorable comparison to last year’s first quarter, during part of which the Omicron variant of Covid-19 had more people avoiding physical grocery stores. Persistently high inflation, which has hit food prices and other goods, likely has consumers cutting back on some services.

One distinction between Instacart and Gopuff is particularly important: They are in much different cash flow positions.

Thanks in part to a booming advertising business, Instacart has more than $1.5 billion in cash on its balance sheet, a person familiar with the matter said. It is also continuing to generate cash, allowing it to avoid raising further capital.

The cash padding allows Instacart to continue to delay going public, despite years of restlessness by employees and investors. The growth slowdown potentially further imperils Instacart’s valuation. It has a couple of years to list publicly before some employees’ stock grants expire, The Information previously reported.

Gopuff, meanwhile, is still burning cash. The company has a different business model than Instacart, operating more like a retailer than a gig-economy middleman. Rather than deliver goods on behalf of grocery stores as Instacart does, Gopuff runs its own warehouses and purchases its own food and alcohol. As of the end of last year, the firm had more than $1 billion in cash, a person familiar with the matter said. The company is aiming to generate a profit by 2024, another person said.

The company is trying to boost its gross margins—the profit margin it makes just on orders, excluding employee costs and other operating expenses—by several percentage points, to 50%, a Gopuff executive told investors last year. The company would do this in part through tougher negotiations with suppliers and boosting the percentage of revenue coming from advertising, the executive said.

Gopuff—which has raised nearly $5 billion over a decade, according to PitchBook—has also pulled out of some European countries, including Spain, to reduce costs. “We have a massive balance sheet and the ability to keep private for as long as we wish to stay private," co-CEO Rafael Ilishayev told the Philadelphia Business Journal last fall.