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Groupon Shares Plunge 27% after Sales Miss Estimates

Tuesday, 14 Aug 2012 04:54 PM

 

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Shares of Groupon Inc. plunged to a record low Tuesday after the largest daily-deal website reported second-quarter revenue that missed estimates as economic weakness in Europe curbed online coupon sales.

The shares retreated 27 percent to $5.51 at the close in New York, the biggest decline since the company’s initial public offering in November. The stock has lost 72 percent since the IPO, leaving the company with a market value of $3.6 billion -- less than the $6 billion buyout offer Groupon received from Google Inc. before it opted for an public market debut.

International revenue, which makes up more than half of the total, was reduced by currency weakness and a lack of demand for big-ticket items in Europe, Groupon executives said. The results suggest Groupon may be struggling to find new growth, said Edward Woo, an analyst at Ascendiant Capital Markets LLC in Irvine, California.

“The business is maturing faster than investors may be hoping for, and growth rates are slowing,” said Woo. “It’s getting tough to grow when you’re already the biggest kid on the block.”

Revenue rose 45 percent to $568.3 million, the Chicago- based company said in a statement Monday. That fell short of the average analyst estimate of $575.3 million, according to data compiled by Bloomberg.

International revenue increased 31 percent to $308.2 million in the second quarter, Groupon said. Growth would have been 45 percent without the impact of foreign exchange rates, the company said.

European Challenges

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

Second-quarter net income was $28.4 million, or 4 cents a share, compared with a loss of $107.4 million, or 35 cents, a year earlier. Excluding some costs, profit was 8 cents a share, which incorporates a 4-cent gain from items including the exchange of a minority interest in its China operations. Analysts projected profit before items of 3 cents a share.

“We had some challenges in Europe,” Groupon Chief Financial Officer Jason Child said in an interview Monday. “Because over half of our business is outside the U.S., the strengthening of the U.S. dollar versus the variety of currencies that we transacted declined since we gave guidance last quarter.”

Groupon Goods

European shoppers bought fewer deals associated with discretionary purchases of $100 or more in the quarter, Chief Executive Officer Andrew Mason said on a call yesterday with analysts.

A larger portion of sales came from Groupon Goods, an e- commerce site for marked-down products. The service made up most of the company’s $65.4 million in direct revenue, which more than tripled from $19.2 million in the first quarter, Child told analysts on the call.

Groupon’s marketing costs fell 58 percent to $88.4 million in the second quarter from $212.7 million a year earlier. Third- quarter revenue will be $580 million to $620 million, Groupon said. That compares with an average analyst estimate of $607.4 million.

The company plans to add hundreds of workers to its office in Palo Alto, California, where it’s building a suite of technology products for local merchants including Groupon Scheduler, an online appointment-booking system, and Groupon Rewards, a loyalty program.

Last month, a third of transactions in North America happened over mobile devices, the company said. That’s a higher portion of sales on mobile than any other e-commerce company, Mason said on the call.

LivingSocial, the top rival to Groupon, narrowed its losses in the second quarter after revenue more than doubled to $138 million from $59 million a year earlier, according to a regulatory filing by one of its backers, Amazon.com Inc.

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