Groupon Shares Plunge as Demand Wanes for Daily Coupons

Wednesday, 27 Feb 2013 04:48 PM

 

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Groupon Inc., the largest daily-deal website, reported fourth-quarter revenue that fell short of analysts’ estimates as consumer demand wanes for Internet coupons.

Sales were $638.3 million, the Chicago-based company said Wednesday in a statement. Analysts on average projected $640.2 million in revenue, according to data compiled by Bloomberg. The net loss widened to $81.1 million, or 12 cents a share, from $65.4 million, or 12 cents, a year earlier.

Groupon Goods, a service started in 2011 to help companies such as Dell Inc. and Garmin Ltd. peddle thousands of marked-down items via two-day sales, has been bringing in a growing portion of revenue as demand cools for daily discounts. The e-commerce business is crimping profits as Groupon invests in infrastructure to store and ship physical goods, said Sameet Sinha, an analyst at B. Riley & Co.

“It’s not a virtual business like the coupon business, where most of the costs are marketing,” Sinha said in an interview before the earnings report. “You need to have a buying organization, logistics, delivery, returns, inventory management.”

Revenue in the current quarter will be $560 million to $610 million, Groupon said in the statement. That compares with an average analyst estimate of $647.7 million.

Groupon shares sank 28 percent in extended trading to $4.28 following the report. Earlier, the stock advanced 7.8 percent to $5.98 at the close in New York.

Seeking Growth

The company makes money by offering discounts -- known as Groupons -- from businesses such as restaurants and nail salons. It then shares the revenue with the businesses.

Chief Executive Officer Andrew Mason is seeking new ways to accelerate growth in order to keep his job. In a November meeting, the company’s board considered replacing Mason as CEO and decided to give him a few more quarters before beginning a search for his successor, two people familiar with the matter said earlier this year.

The company promoted a new chief operating officer, former EBay Inc. executive Kal Raman, in the fourth quarter to jump- start growth in its struggling overseas business.

Tiger Global Management LLC, the $8 billion hedge fund run by Chase Coleman and Feroz Dewan, said in November it acquired a stake of about 10 percent in the daily deal site.

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