Groupon Crushes Q4 Estimates, but Mixed Forecast Drags Down Stock
Groupon’s mixed forecast for the first quarter overshadowed a strong performance for the holiday season, dragging shares down as much as 11 percent in after-hours trading.
In an interview, CEO Eric Lefkofsky said the first quarter will include integration costs related to buying Korean site Ticket Monster and fashion site Ideeli as well as marketing costs related to driving more usage of its deals marketplace. Together, the first-quarter costs will likely lead to a loss per share of two cents to four cents, the company said.
Groupon said it expected revenue of $710 million to $760 million in the current quarter, compared to analyst estimates of $668 million. Analysts had been forecasting earnings of six cents per share for the current quarter.
The increased marketing costs, which are expected to reach $25 million in the first quarter, are aimed at helping the company lessen its reliance on email marketing by raising awareness of its searchable database of deals in other ways. Groupon’s belief is that once customers become aware of the growing selection of long-term deals at Groupon.com, they will come back without being prompted by email messages.
Groupon has more motivation than ever to move away from a reliance on email as a result of Gmail’s recent changes to the way it filters marketing emails. Lefkofsky said in an interview that the company continues to be negatively impacted by the Gmail changes.
“We’re able to make up for it by investing in other areas where we are driving traffic to our site,” he said.
The company’s revenue grew 20 percent to $768 million in the fourth quarter, crushing analyst estimates of $718 million. Groupon also beat the Street on earnings, recording income of four cents per share, excluding some items; analysts had expected earnings per share of two cents.
I’ll be listening in to the company’s analyst call in a few minutes and will add more details afterward.
Update 5:45 pm ET: On the company’s analyst call, chief financial officer Jason Child said the company is writing off its investment in Chinese site FTuan, and said fellow investor Tencent also declined to provide additional funding to the startup.
Lefkofsky explained that the company is not giving up on trying to innovate around its marketing email channel. He said Groupon will launch a new email technology dubbed Mindstorm that it believes will increase revenue per email. Lefkofsky described the technology as an “email system where you can start to market categories of deals rather than just one per email.”
“We still send far too many irrelevant emails,” he added. “That’ll change in 2014.”