Groupon Shocks With Earnings Comeback

Is Groupon headed for a comeback?

While it’s too early to tell as Groupon is still in an adjustment period, Groupon posted better-than-expected fourth quarter earnings, which sent its stock soaring around 20 percent in after-hours trading.

The first earnings report under its new leadership — CEO Rich Williams, who was officially named in its third quarter earnings report in November — certainly suggests that better days could be ahead for the eCommerce marketplace. But, for now, investors will have to wait and see if better days are on the way or if the hype was short-lived.

But, of course, Groupon (and its stock price) has been suffering heavily for much of the past year, so this most recent earnings report showed a bright spot for the company that spent much of 2015 playing defense. Groupon’s stock in recent weeks has been slumping and closed at $2.65 on Thursday (Feb. 11).

And that showed in its earnings, as the net loss (attributable to common stockholders) was $46.5 million, compared to a new profit of $8.8 million the year prior. But growth in other metrics seemed to give Groupon the positive report it badly needed — at least on The Street. Gross profit was $371.7 million in Q4 2015, compared with $378.1 million the year prior.

During that report, it was revealed that Groupon’s plans for the future involve being a “new Groupon,” which meant retreating from regions that weren’t performing. What Groupon’s executive team admitted is that the company had stretched itself too thin and jumped into too many sectors, too quickly. At that time, the team said it was time to focus on a stronger product mix that produced higher margins.

Jump forward to yesterday’s report, and it looks like the changes are starting to take shape — and make a positive impact. Its fourth quarter earnings showed gross billings of $1.7 billion ($6.3 billion for the full 2015), which was nearly flat on the quarterly comparison but was up nearly 2 percent on the year. That revenue was also nearly $70 million above projections. Revenue for Q4 was $917.2 million, up almost 4 percent when compared with 2014’s Q4; 2015 full-year revenue was $3.1 billion, up from $3 billion the year prior.

“2015 saw sustained progress toward our vision of making Groupon the daily habit in local commerce,” said CEO Rich Williams. “Following a stronger-than-expected fourth quarter, we enter 2016 with a continued focus on streamlining our global operations, reducing our reliance on low-margin products in our shopping business and rekindling our customer acquisition efforts to set the stage for accelerated growth.”

In the earnings call with analysts, Williams noted that Groupon is seeing double-digit growth (for the eighth quarter in a row) in its North American segment, which is where the company has focused its efforts since it’s been its strongest market. Sales for that segment grew 11 percent in the quarter. Groupon noted that its North American billings spiked 41 percent from Black Friday through Cyber Monday alone.

During the company’s earnings call, Williams also spoke for the business growth it’s produced across its marketplace and for its merchants. He also recognized the challenges ahead as Groupon works to overcome the slump that hit in 2015.

“We continue to be one of the best new business drivers at scale for local merchants. We continue to grow and evolve our marketplace. We continue to increase traction among customers. We continue to have much left to do. 2015 was also a tough year for Groupon; with seven years of pioneering in local, we’ve learned some hard but valuable lessons,” he said.

“We learned that our supply and product efforts will take much longer than expected to drive the kind of growth we believe is possible. We learned that we weren’t focused enough on high-frequency local categories and that they would require investment to unlock their potential. Similarly, we realized that empty calories in our shopping business might be good for revenue but that they often weren’t in line with the long-term health of the business and model. We realized just how critical it is to focus our energies on levers that make sizeable impacts on the business long term,” Williams said.