Groupon Inc. (GRPN) slumped the most since November after forecasting sales that missed estimates, underscoring the challenge facing Andrew Mason, whose board has already considered replacing him as chief executive officer.
The shares retreated 19 percent to $4.83 at 1:50 p.m. in New York, and earlier touched $4.24 for the biggest intraday decline since Nov. 9. Groupon said yesterday that first-quarter revenue will be $560 million to $610 million. Analysts on average had predicted $647.7 million, according to data compiled by Bloomberg.
Mason is sharpening a focus on retail to boost growth as demand for online discounts fades and pressure from investors and his board rises. Groupon directors discussed ousting him in November, people with knowledge of the matter said then. Though Mason is working to lessen the company’s reliance on coupons, his efforts so far haven’t met expectations, said Edward Woo, an analyst at Ascendiant Capital Markets LLC.
“This is still a big work in process for them to transform from just a daily deal business to a local e-commerce engine,” Woo said. “The guidance for the first quarter is much weaker than people expected.”
Fourth-quarter sales were $638.3 million, Chicago-based Groupon said in a statement, while analysts had projected $640.2 million. The fourth-quarter net loss widened to $81.1 million, or 12 cents a share, from $65.4 million, or 12 cents, a year earlier. Analysts had estimated a net loss of 2 cents. Sales in the fourth quarter of 2011 were $492.2 million.
Before today, the stock had advanced 7.8 percent to $5.98 at yesterday’s close in New York. It had declined 70 percent since the company’s initial public offering in November 2011.
The company generates revenue by offering discounts --known as Groupons -- from businesses such as restaurants and nail salons. It then shares the revenue with the businesses.
At the November board meeting, directors decided to give Mason a few more quarters before beginning a search for his successor, two people familiar with the matter said in January. The lower-than-predicted forecast for the first quarter may bode ill for his prospects.
“He’s here today,” Paul Taaffe, a Groupon spokesman, said in an interview yesterday when asked if the results would affect Mason’s role.
Groupon Goods, a service started in 2011 to help retail companies such as Dell Inc. and Garmin Ltd. (GRMN) peddle thousands of marked-down items via two-day sales, is on track to reach about $2 billion in annual billings, Groupon said in the statement.
E-commerce sales will be slower in the current quarter than in the previous period because of a drop in demand following the holiday shopping season, Chief Financial Officer Jason Child said in an interview.
“The first quarter is lighter than expected because the Goods business is now at a $2 billion run rate,” Child said. “At that size, we are now seeing seasonality.”
Groupon Goods is growing slower than some analysts expected in part because the company hasn’t decided which products are best to sell using the service, said Sameet Sinha, an analyst at B. Riley & Co.
“They are testing what goods work and what don’t -- they are getting the right mix,” he said.
Even as the new business gains traction, it stands to put pressure on profitability.
Margins may be squeezed as Groupon spends money on shipping physical goods to compete with more established online retailers, such as EBay Inc. (EBAY), Amazon.com Inc. and Overstock.com Inc. (OSTK), said Abe Garver, managing director of West Palm Beach, Florida-based supply chain consultant BG Strategic Advisors.
“Under a best-case scenario, redirecting resources to Groupon Goods makes it a direct competitor of Amazon, EBay, Overstock and other top 500 Internet retailers,” Garver wrote in an e-mail. “The margins are thin and professional investors already have exposure to the sector.”
International revenue in the fourth quarter fell 16 percent to $263 million, the company said. Billings outside the U.S. rose 6.2 percent to $801.5 million. The company promoted a new chief operating officer, former EBay Inc. executive Kal Raman, in the fourth quarter to jump-start growth in its struggling overseas business.
Tiger Global Management LLC, the $8 billion hedge fund run by Chase Coleman and Feroz Dewan, said in November it acquired a stake of about 10 percent in the daily deal site.
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