Groupon reported a big miss on first-quarter revenue, sending its shares down sharply, but the e-commerce marketplace said its strategy of focusing on profitability is on track.
Groupon’s revenue of $673.6 million for the quarter was down about 4% on a year ago and well below analysts’ estimates of $725 million. But its net loss shrank to $20.9 million from $43.5 million and adjusted earnings of 1 cent per share beat estimates of a 1 cent loss.
“In the first quarter, we continued to make solid progress in our mission to be the daily habit in local commerce,” CEO Rich Williams said in a news release. “Our focus on growing customers in our marketplace, significantly improving the customer experience and continuing to streamline and simplify our business helped drive a 42 percent year-over-year increase in adjusted EBITDA and gross profit of $309 million for the quarter.”
On news of the earnings, Groupon shares fell more than 13% to $3.47 in trading Wednesday. But Williams told analysts in an earnings call that revenue fluctuations are to be expected as the company focuses on growing gross profit.
“This may seem basic, but for us it means placing a premium on gross profit growth and achieving our strategic goal, even if it means lower revenue,” he said.
As TechCrunch reports, Groupon “has been on a long road of trying to cut out less profitable parts of its business and refocus itself as a smaller organization on what is working well.” On Wednesday, it announced it had reached its goal of cutting down its operations to 15 markets in total, less than half of its peak when it operated in nearly 50 countries.
Aaron Turner, an analyst for Wedbush Securities, said that as Groupon prioritizes higher-margin sales, it makes sense for the company to focus on profitability.
“Generally speaking, from a long-term perspective, I would agree with management’s take that things are moving in the right direction,” he told the Chicago Tribune. “However, from a quarter-to-quarter basis, it’s definitely not a linear recovery path, and that leads to fluctuations in the stock price like we see today.”