Groupon Soars 23% On Favorable Earnings

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Not dead yet, deal site Groupon soared 23% in initial after-hours trading, following a better-than-expected fourth quarter earnings release. The company beat revenue forecasts, bringing in $917 million, instead of the anticipated $846 million, and a 9% year-over-year increase.  Adjusted earnings per share was at four cents, whereas Wall Street was expecting zero.

This is quite the bright spot for the company — until today, the stock had been down 71% in the past year. Shares closed Thursday at $2.24, a far cry from the $20 per share Groupon saw when it went public in November 2011.

Rich Williams was promoted to Groupon CEO in November, and has helped the company streamline its efforts, by closing up shop in underperforming markets. Williams tells TechCrunch that “we need to win where winning is material.” Groupon “made the hard call to allow the team to focus on what really matters.”

In fact, Chicago-based Groupon says that 85% of its business comes from its top ten markets. Food, beauty and events remain the most popular categories in these regions. Most customers purchase the Groupon coupons on mobile.

Williams tells TechCrunch that right now Groupon is focusing on the cities  where it performs best and the goal is to “increase our customer acquisition and customer growth.”

Yet “daily deals” has proved to be a challenging business. While consumers like the discounts, the coupons yield low margins and sometimes create supply-demand imbalances at participating retailers. And the multitude of deal sites has resulted in a “deal fatigue,” where users have grown accustomed to discounts and the novelty has worn off.

Groupon has expanded beyond its core local deal business, acquiring services like Ideel, for fashion discounts and OrderUp, for food delivery. But perhaps until now, nothing has been able to change investor perception that the Groupon brand is tarnished.

At one point, the company held acquisition conversations with Google, around a $6 billion price tag.  Today, Groupon closed the day with a market cap of $1.4 billion.