What happened
Shares of Groupon (GRPN +5.11%), which describes itself as a trusted local marketplace, fell sharply in morning trading on Aug. 9, losing just shy of 10% at one point over the first few hours of the day. After regaining some of that lost ground, the stock dipped again in the afternoon, dropping as much as 10.5% within the last hour of trading. The big news was the company's second-quarter 2022 earnings update, which hit the market after the close on Aug. 8. Investors were not particularly pleased.
So what
The first words from CEO Kedar Deshpande in Groupon's news release were both honest and disheartening: "Our overall business performance is not at the levels we anticipated. ..." The news release focused not on the recent performance but on the steps management is taking to address the problems it faces. These include cutting costs, improving the online customer experience, and increasing the use of automation. This isn't a materially different plan from the one that the company discussed in its first-quarter earnings release. That said, management reiterated its expectations for the full year, stating that it believes the company will be cash flow positive on an ongoing basis by Q4. Given the lack of success in the turnaround effort so far, it's not surprising that investors see this glass as half empty.
NASDAQ: GRPN
Key Data Points
It wasn't until the bottom of page three that the Q2 performance was discussed in any detail. Even then, the discussion was a bit backward, with segment results broken out before Groupon's top-level information was presented. Some investors might get the impression that management was trying to bury the lede, given that none of the news was good. Consolidated results tell enough of the story, with sales down 42% year over year in Q2. Looking just at what the company calls its local revenue, which is basically its core coupon-selling operations, sales were off by a lower, but still disheartening, 26%. The company lost $0.34 per share, down from a profit of $0.33 in Q2 2021. The company missed the Wall Street consensus by a wide margin on both the top and bottom lines. Investors don't like to see that.
Now what
To be fair, Groupon is still a company in transition as it exits the business of selling physical items (which requires inventory and has a vastly different revenue and cost structure) and shifts back to selling coupons from local merchants and restaurants. Change is never easy or smooth. However, this quarter's update wasn't inspiring and basically shows that Groupon still has a lot of work ahead of it.
