Instacart forecasts weak fourth-quarter on tepid consumer spend

By Juveria Tabassum

(Reuters) -Instacart on Tuesday forecast current-quarter gross transaction value (GTV) and core profit below estimates, in signs that spending on online grocery and food deliveries on its platform could temper in the holiday season.

Competition has picked up in the online delivery space, building on a pandemic boom that allowed firms such as Instacart (NASDAQ:CART), UberEats and DoorDash (NASDAQ:DASH) to diversify their product offerings and raise transaction fees. 

However, spending has cooled as household budgets buckle under pressure from higher prices.

Intacart, which also offers same-day delivery on products from Home Depot (NYSE:HD), expects a fourth-quarter GTV between $8.50 billion and $8.65 billion, below estimates of $10.20 billion, as per data compiled by LSEG.

Target (NYSE:TGT) for adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of between $230 million and $240 million was also below estimates.

In contrast, rival Doordash forecast fourth-quarter core profit above estimates.

“Given the momentum of the business, paired with how well Instacart performed last year during the holiday season, it is surprising to see a more conservative forecast,” said eMarketer senior analyst Blake Droesch.

Instacart’s shares were down 5% in after-hours trading.

Still, the company swung to a profit in the reported quarter and topped estimates on key metrics, with orders growing 10% year-over-year, helped by its low-cost delivery options to attract cost-conscious consumers.

Advertising revenue growth of 11% in the third-quarter was flat sequentially. Financial chief Emily Reuter said on a post-earnings call that strong advertising spending from emerging brands helped offset a pullback from larger consumer packaged goods firms.

Instacart has broadened tie-ups on its platform, adding companies such as Party City and offering digital coupons from retailers, while its partnership with UberEats brought restaurants on board for food delivery.

“These developments are a clear indication that Instacart has big ambitions to go from a grocery delivery service to an all-around retail technology giant,” Droesch added.

Third-quarter adjusted EBITDA of $227 million topped estimates of $212.08 million, while GTV rose about 11% to $8.30 billion, beating estimates of $8.19 billion.