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DoorDash said it expects to spend more than $50 million in the second quarter on gas price relief for its delivery drivers, as higher fuel costs continue to pressure people who use their vehicles for deliveries. The San Francisco-based company said the program is tied to a sharp increase in gas prices that it linked to the Iran war.
DoorDash said in March that it would offer extra compensation to U.S. and Canadian drivers as a temporary effort to offset the increase. The company said the national average for a gallon of gas on Wednesday was $4.53, up 44% from a year ago, according to AAA.
In its latest earnings report covering the January-March period, DoorDash said demand for deliveries remained strong despite higher gas prices. The company said total orders rose 27% to 933 million, though that number fell below Wall Street’s forecast of 954 million, according to analysts polled by FactSet.
DoorDash also said winter storms closed businesses and dampened demand in some locations during the quarter. The company reported revenue rose 33% to $4.0 billion, compared with analysts’ expectation of $4.15 billion, according to FactSet.
To fund the gas price relief, DoorDash said it would make adjustments to investments in other areas. In a conference call with investors, DoorDash Chief Financial Officer Ravi Inukonda said the company had “to push out some investments … in order to make room for this,” and he said that if the program is extended, the company’s goal would be “to find offsets.”
DoorDash reported net income fell 5% to $184 million, or 42 cents per share, for the January-March period. The company said the decline came in part from a 30% increase in research and development costs compared with the same period a year earlier, and it said the profit beat analysts’ estimate of a 36-cent per share gain, according to FactSet.
DoorDash said its shares rose more than 11% in after-hours trading Wednesday after the earnings release. The report arrived a week after Uber announced a deal with Expedia Group that would let users make hotel reservations through the Uber app.
When asked whether DoorDash plans to add similar reservations service, DoorDash Co-founder and CEO Tony Xu said the company still sees room to grow in its core restaurant and retail delivery business. Xu said DoorDash is “a tiny fraction of what’s actually available and addressable,” and he argued that the company has a “large runway” to expand what it offers.