News Column

Groupon Narrows Loss in 1Q, Opens New Chapter

May 9, 2013

Groupon Inc. claimed Wednesday a "new chapter" in its history, seeking to fundamentally shift the way the company sells its deals to customers and offering more financial disclosures.

It was the first quarter that the Chicago-based daily deals company reported earnings since the departure of co-founder and former Chief Executive Andrew Mason, who was fired at the end of February. He was replaced by two board members, Eric Lefkofsky and Ted Leonsis, who are running Groupon while a search committee hunts for a long-term replacement for Mason.

On a conference call with analysts, Lefkofsky offered a broad view of Groupon's history and future, speaking optimistically about building on Mason's vision while acknowledging some missteps. He also said the company will be providing more detailed information on the performance of individual segments such as Groupon Goods, which sells discounted products such as apparel and housewares.

"At times as an organization, we've spread ourselves too thin and failed to focus on the things that will have the greatest impact," Lefkofsky said. "And at times ... it's been difficult for you and others to gauge our progress. As we start a new chapter, we intend to be more focused and endeavor to provide additional insight along the way."

Lefkofsky said executives were "encouraged" by Groupon's first-quarter performance. The company narrowed its net loss to $4 million, or 1 cent a share, from $11.7 million, or 2 cents a share, in the first quarter of 2012.

The earnings report sent Groupon's stock up more than 10 percent in after-hours trading.

Revenue rose 7.5 percent to $601.4 million in the first quarter from $559.3 million a year earlier. North American operations were entirely responsible for the increase, posting a 42 percent jump in revenue. The international segment saw revenue drop 18 percent from a year earlier.

"We have a lot more work to do, especially in our international business," Lefkofsky said.

Groupon has been undertaking a turnaround of its international operations, where quality control has suffered in the company's zealous pursuit of growth. The company is rolling out deal personalization technology and other tools overseas to get performance in line with North America, where those features have yielded fruit. However, "we're nowhere close to being done" with this process, Chief Operating Officer Kal Raman said Wednesday.

Groupon reported progress in transforming its model from morning email blasts to an online marketplace where subscribers can search thousands of ongoing deals on their computers or mobile phones. Lefkofsky said the company is midstream in this shift, which "will fundamentally alter the way our consumers interact with Groupon."

For local businesses, the new strategy means signing up for recurring monthly offers rather than one-off deals. Lefkofsky said that in March, 60 percent of merchant contracts inked in North America were for this model. Email accounted for less than 45 percent of North American transactions in the first quarter. An increasing number of customers are also buying Groupons on their smartphones. Lefkofsky said he believes Groupon will "one day be predominantly mobile."

As for the CEO search, Leonsis said the board is taking its time to find a new leader.

"The business is complex and we're learning a lot, so we don't expect this to be a simple search," said Leonsis, the CEO of Monumental Sports & Entertainment LLC, the owner of sports properties such as the Washington Wizards and Washington Capitals. "The good news is we're not in a hurry. The leadership team is very, very strong and gelling very, very nicely. That's afforded us some flexibility to take our time to find the ideal long-term CEO."


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Source: (c)2013 the Chicago Tribune. Distributed by MCT Information Services


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