Groupon shares dive 24 percent on "underwhelming" forecast

Wed Feb 27, 2013 6:02pm EST
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By Alistair Barr

SAN FRANCISCO (Reuters) - Groupon Inc lost almost a quarter of its market value on Wednesday after the company began to take a smaller cut of revenue on daily deals, sacrificing revenue and profits to attract and keep merchants.

"This raises questions about how these guys are going to be able to scale the business," said Tom White, an analyst at Macquarie. "The forecast is underwhelming."

Groupon shares fell 22 percent to $4.65 in after hours trading on Wednesday.

The Chicago-based company started sharing more money from its deals with merchants early in the fourth quarter to persuade them to run an offer for the first time or work on another offer.

That dented revenue and profit in the fourth quarter, Chief Financial Officer Jason Child said in an interview.

"We are focused on driving growth," he said. "We will make the investments we feel we need to optimize for growth and merchant profitability."

Fourth-quarter revenue rose to $638.3 million from $492.2 million in the year-ago period. The company also reported a net loss and an operating loss in the latest period.

Groupon was expected to make 3 cents a share on revenue of $638 million, according to Thomson Reuters I/B/E/S.   Continued...

People enter and leave Groupon Inc corporate office and headquarters in Chicago, Illinois, November 4, 2011. REUTERS/Frank Polich