Yesterday, shares of Groupon, Inc. GRPN surged over 7% as investors reacted postively to the company's Thanksgiving weekend sales data. As per the blog post from newly elected CEO Rich Williams, for the four-day weekend, billing across North America improved 41% year over year while customers purchased 52% more Groupons.
As online sales beat brick and mortar sales for the first time ever, e-tailers including Groupon had a field day. As per Groupon’s sales data, merchandise like, NFL scarf and glove sets, Apple EarPods and Apple Lightning charging cables, wireless bluetooth anti-loss key trackers, Wallet Ninjas, Swarovski Elements necklaces and unbreakable flying helicopters were some of the most sold items this weekend.
Groupon also enjoyed a massive uptick in people buying local Groupons for restaurants, spas, salons, or for other local merchants. Groupon remains committed to developing local businesses to help them combat competition from giant online retailers.
With the holiday season in full swing, Groupon says it is ready for the challenge with “millions more gifts to deliver, amazing deals and customers to serve.”
Last month, Groupon stock was mercilessly battered by investors. Shares fell over 24.5% in the month. In fact, the stock registered its sharpest fall of 26%, following the announcement of its third quarter 2015 results on Nov 3. Moreover, the company’s guidance for the current quarter was also disappointing.
Though this was the first quarter of earnings (if only after excluding one-time expenses) after a long time, investors weren’t impressed. Though investors have reacted positively to Thanksgiving sales data, the company currently faces a bunch of concerns. These include its inability to boost revenues, a complete turnaround in management and marketing strategy and importantly, underperformance in some key regions that forced the company to shut down operations.
We can also argue that all these changes are somewhat corrective measures for the fiascos under the previous business strategy. Since its IPO in 2011, Groupon has been focused on rapid international expansion, which took a severe toll on its profits. But since this did not add enough users in the new regions, it led to suboptimal performance and subsequent exit from these regions.
New CEO Rich Williams attempted to cheer investors with a three-pronged strategy emphasizing international growth, shopping and marketing initiatives. Though a positive, it’s important to note that such initiatives typically take some time to materialize and also impact the bottom line.
Also, Groupon intends to ramp up its marketing activities significantly going ahead. The company expects to increase 2016 marketing related expenses by $150 million to $200 million, or a negative impact of about 2 cents to 3 cents per share on the bottom line.
Amid the increased uncertainty, the company will also have to deal with competition from players like eBay and Amazon.com, Inc. AMZN on the one hand and smaller companies like LiveDeal on the other. In addition, increasing encroachment of social media companies like Facebook FB and Alphabet GOOGL into the e-commerce space can also pose serious challenges for Groupon’s recovery as merchants are increasingly adopting these platforms to sell their products.
For the time being, Groupon’s turnaround remains a wait and see story.
Groupon, at present, has a Zacks Rank #3 (Hold).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment