Groupon, Inc. GRPN has announced a fresh set of changes to its managerial team. The company has elevated Jay Sullivan, currently serving as head of consumer products, to the post of chief product officer while naming Aaron Cooper as the head of North American Services operations.
Cooper is currently heading the company’s North American Goods business, which will now be taken over by Jacob Hawkins. Hawkins earlier served as the vice president of e-commerce at the apparel retailer Aéropostale.
These changes come a few days after Sri Viswanath, the company’s chief technology officer put down his papers as per Bloomberg. Viswanath’s exit marks another high profile departure for the e-tailer. Earlier this year, Groupon’s CEO Eric Lefkofsky, CFO Jason Child and senior vice president, Robbie Schwietzer quit their roles.
Groupon has been struggling with declining sales and profitability for quite some time now as the company 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.
The deteriorating performance has caused share price to fall drastically. Year-to-date, the stock has lost 61.8% of its value and in the last month itself, the shares were down 24.5%. In fact, the stock registered its sharpest fall of 26.3%, 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.
To cheer up investors, new CEO Williams has taken up restructuring in a big way and the managerial changes are in sync with its strategy.
Williams is attempting to bring about a turnaround in the company’s performance with a three-pronged strategy emphasizing international growth, shopping and marketing initiatives. Though positive, it’s important to note that such initiatives typically take some time to materialize and also impact the bottom line.
Also, as Groupon intends to ramp up its marketing activities significantly going ahead, the company expects 2016 marketing expenses to increase by $150 million to $200 million, resulting in 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).
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