Uber loses $2.9 billion and offloads bike and scooter business

Uber lost US$2.9 billion (Dh10.6bn) in the first quarter of 2020 as its overseas investments were hammered by the coronavirus pandemic, but the company is looking to its growing food delivery business and aggressive cost-cutting to ease the pain.

"I won't sugarcoat it," chief executive Dara Khosrowshahi said in a conference call with investors on Thursday.

"Covid-19 has had a dramatic impact on rides, with the business down globally around 80 per cent in April."

The ride-hailing giant said it is offloading Jump, its bike and scooter business, to Lime, a company in which it is investing $85 million. Jump had been losing about $60m a quarter.

“While our rides business has been hit hard by the ongoing pandemic, we have taken quick action to preserve the strength of our balance sheet, focus additional resources on Uber Eats, and prepare us for any recovery scenario,” said Mr Khosrowshahi.

“Along with the surge in food delivery, we are encouraged by the early signs we are seeing in markets that are beginning to open back up.”

Earlier this week, San Francisco-based Uber said it was cutting 3,700 full-time workers, or about 14 per cent of its workforce, as people avoiding the pandemic either stay indoors or try to limit contact with others.

Its main US rival Lyft announced last month it would lay off 982 people, or 17 per cent of its workforce because of plummeting demand. Careem, Uber's subsidiary in the Middle East, cut its workforce by 31 per cent.

However, revenue in its food delivery business grew 53 per cent as customers shuttered at home opted to order in.

The company exited markets where its meal delivery business was unprofitable, including the Czech Republic, Egypt and Honduras. But it added key accounts including Chipotle, Dunkin' and Shake Shack and it enabled delivery from grocery and convenience stores.

“At a time when our rides business is down significantly due to shelter-in-place, our Eats business is surging,” said Mr Khosrowshahi.

Uber's bottom line was also hurt in the first quarter when the value of its investments in Chinese ride-hailing giant Didi, Singapore-based Grab and others plummeted by $2.1bn as demand collapsed in those regions.

Grocery delivery could be a part of Uber's future in the US.

“There's going to be more room for more than one player,” Mr Khosrowshahi said. “We are in many of these cities already. So we just have the infrastructure to be able to get started in these cities ... in a very low cost way.”

Uber updated its driver app to make it easier for ride providers to pick up delivery work and nearly 40 per cent of drivers in the US and Canada cross-dispatched to work for the Eats platform in April, the company said.

But getting into grocery delivery would take time and the boost in restaurant delivery is not enough to stem Uber's losses, said Eric Schiffer, chief executive of the Patriarch Organisation, one of the leading private equity firms in technology and media.

“This is a brutal body blow to Uber’s path to profitability and potentially even its existential future, because few rational people are willing to put themselves into harm’s way to ride in a vehicle and many drivers have their own concerns,” Mr Schiffer said.