Reuters: Technology News: Groupon shares dive 24 percent on "underwhelming" forecast

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Groupon shares dive 24 percent on "underwhelming" forecast Feb 27th 2013, 23:02 Tweet Share this Email Print Related News Groupon CFO says shared more revenue with merchants in fourth quarter 5:36pm EST Analysis & Opinion Buying our way out of the IPO era Fading productivity could hurt U.S. job growth Related Topics Investing and Taxes Simplified » Tech » People enter and leave Groupon Inc corporate office and headquarters in Chicago, Illinois, November 4, 2011. Credit: Reuters/Frank Polich By Alistair Barr SAN FRANCISCO | Wed Feb 27, 2013 5:36pm EST 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. The company forecast first-quarter revenue of $560 million to $610 million. This is sharply below the $650 million average estimate of analysts polled by Thomson Reuters I/B/E/S. Groupon Goods, the company's discounted product sales business, generated a lot of the fourth-quarter revenue growth. However, sales growth will slow in the first quarter, as is typical with other e-commerce businesses, Child said. The Goods business also has lower margins than Groupon's original daily deals business, he noted. The cut in its so-called "take rate", which many analysts had speculated was necessary to revive participation among merchants in its Internet offers, contributed to weak fourth-quarter results. That was also partly behind the disappointing first-quarter revenue forecast. A larger-than-expected seasonal decline in the company's Goods e-commerce business also drove the weaker first-quarter forecast. (Reporting by Alistair Barr; Editing by David Gregorio and Richard Chang) Investing and Taxes Simplified Related Quotes and News Company Price Related News Tweet this Link this Share this Digg this Email Reprints We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/ Comments (0) Be the first to comment on reuters.com. Add yours using the box above.

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