Shares of Groupon Inc (GRPN) jumped 3.89% (34 cents) to close at $9.09 on Dec 3, 2013, after the online daily deals provider announced blockbuster holiday weekend sales.
Groupon stated that sales in this four-day holiday weekend was its biggest since its inception. Billings were up 30.0% from the year-ago period and more than 50% transactions (55.0% of North American transactions) were carried out through mobile devices.
According to Groupon, toys, electronics and home goods were top-sellers during the period. The strong sales were primarily attributed to a redesigned website as well as the lucrative deal offerings during the weekend.
Groupon’s policy of remaining open on Thanksgiving and launching the Holiday Gift Shop for Apple’s (AAPL) iOS and Google’s (GOOG) Android app paid off, in our view.
The company’s offering of more than $100.0 million in Groupon Credits (also known as Groupon Bucks) and the launch of freebies just prior to Thanksgiving also attracted holiday customers.
Freebies include digital coupons, promotion codes, sales, giveaways and samples, from more than 5,500 brands in the United States. The company plans to expand the offering to some key international markets in 2014.
The new category reflects Groupon’s strategy of diversifying its business in addition to the core daily deals segment. However, the coupons will take some time to contribute meaningfully toward the top-line growth.
This is due to the fact that unlike daily-deals (revenues earned upfront), Groupon will earn revenues from coupons only if customers redeem them and purchase goods from the retailer.
Nevertheless, the strong holiday season sales will boost Groupon’s upcoming quarterly results. For the fourth quarter of 2013, Groupon forecasts revenues to be in the range of $690.0 million to $740.0 million. The company expects the bottom line to range from breakeven to earnings of 2 cents per share
Although mobile presents ample growth opportunity, increasing competition from more established players such as eBay (EBAY) remains a major concern. Moreover, a volatile macroeconomic environment and continued investments to expand its merchant base are expected to impact near-term results.
Currently, Groupon carries a Zacks Rank #3 (Hold).
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