Groupon Share Price Plunges after Third-Quarter Results

on Nov 9, 2012

Groupon (NASDAQ:GRPN) once again saw its shares tumble after releasing its third-quarter results, which drastically missed revenue estimates.

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**Disappointing Third Quarter Earnings**
The company reported consolidated revenue of $568.6 million (£356 million), 32 percent higher year-on-year but below analysts’ estimates of $591 million (£370 million). A net loss came out at $2.98 million (£1.87 million), negatively impacted by stock-based compensations and acquisition-related expenses of $25.1 million (£15.7 million).

“Our solid performance in North America was offset by continued challenges in Europe,” said Andrew Mason, CEO of Groupon.
Nearly half of Groupon’s revenue comes from outside the US and the segment is exactly where the company is struggling to grow. Despite new management appointments meant to bolster the performance in Europe, currency movements and weak demand for online coupon shopping outside the US continue to pose challenges.

“Some people have expected a quick turnaround in Europe,” said Sameet Sinha, an analyst at San Francisco-based B.Riley & Co “What they don’t understand is it’s a huge task.” International revenue grew by 3 percent to $277 million (£174 million), a very low number compared to the staggering triple digits growth percentages in 2011.
Consolidated segment operating income (CSOI) was $50 million (£31 million) in the third-quarter when Groupon had forecast between $30 million (£18.8 million) and $50 million (£31 million) for the last quarter of this year. Mr Sinha said he expected CSOI of $65.7 million (£41 million) for the July-September period and $67.7 million (£42.4 million) for the current quarter. “CSOI was a big miss and Europe is taking it on the chin,” Sinha said.

**Job Cuts**
In its third-quarter press release Groupon announced it will be eliminating 80 sales jobs as it automates its sales and marketing operations.
“Groupon announced several months ago it would be using technology to increase productivity through automation,” Julie Mossler, a spokeswoman for Groupon, said in an e-mailed statement before the earnings announcement. “We will always aim to optimize business operations wherever opportunities are identified.”

!m[More Than 80 Percent of Groupon’s IPO Valuation Lost](/uploads/story/762/thumbs/pic1_inline.png)According to BusinessInsider in the last six months the company has in fact eliminated 648 positions from its 12,800 workforce.
**“Groupon Goods”**
Mr Matison said the company is increasingly relying on growth in its year-old retail business, Groupon Goods, although he downplayed the serious competition in the direct e-commerce market. “We would never try to out-Amazon Amazon,” he said, saying Groupon’s strength was in the curation of the goods.
Groupon Goods, a service that sells discounted products like televisions and jewellery, reached nearly $1.5 billion (939 million) in global billings annually and almost $500 million (£313 million) in revenue. The company generated $145 million (£90.76 million) direct revenue from selling merchandise, up from $7.2 million last year. However, Groupon spent $127 million (£79.5 million) on the inventory, shipping, and marketing of those goods.
**Stock Price:**
The stock price was up by 4.26 percent to $3.92 in the regular trading session on Thursday but plummeted by more than 18 percent to $3.21 in afterhours trading. Shares in Groupon have lost more than 80 percent of their value since the IPO.


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