Amazon is exiting food delivery, but that doesn’t make GrubHub a good buy, Jim Cramer says

  • “The bottom line is that Amazon’s getting out of the food delivery space, that doesn’t change anything,” CNBC’s Jim Cramer says.
  • “GrubHub’s still facing relentless competition. I think it’s way too risky to own here,” the “Mad Money” host says.
  • “Sometimes an industry will be booming, like this one, but there’s no real good way to invest in it,” he says.

… “The company’s been spending money like crazy to defend its market share, and their efforts … haven’t been all that successful,” he said. “Frankly, you can read Amazon’s decision … as an indictment of the whole industry.”

…Earlier this week, however, Domino’s Pizza CEO Ritch Allison questioned if delivery apps like GrubHub are sustainable. He conceded that delivery competition put a dent in second-quarter pizza sales before telling Cramer that investors are subsidizing low delivery prices to take unprofitable market share.

“We don’t know how that’s going to shake out once consumers actually have to pay the full cost of that delivery because those fees are quite substantial, relative to the cost of the underlying food,” Allison said at the time. “I think we also have not yet seen what’s going to happen with the supply of restaurants on these platforms as well.”

On Friday’s show, Cramer noted that the New York State Liquor Authority laid out new rules that could impact how GrubHub charges restaurants usage fees. GrubHub’s pricing structure, while negotiable, can cost food partners about a 20% marketing commission, a 10% delivery commission and a 3% processing fee on each order, CNBC reported.

If regulations are on the horizon, that may have an uncertain impact how delivery companies make money.


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