Struggling to survive in the increasingly competitive online marketplace it pioneered, daily deal company Groupon saw its stock price on Thursday hit a new low in late-day trading after another disappointing third quarter earnings report.
Groupon investors are growing skeptical about the company’s future. Shares fell to $3.23 in after-hours trading, as the Chicago-based company missed analysts’ estimates, adding to concerns about its growth potential. The stock is sharply down from its November 2011 initial public offering price of $28.
Groupon reported revenues of $568.6 million after the Wall Street markets closed, a 32 percent increase from the same quarter in the previous year, but lower than the $590.1 million analysts were expecting.
The company also announced Thursday that it had laid off 80 sales employees this week, reflecting what it said were internal efforts to automate some sales functions.
The net loss was $3 million, or zero cents per share. The company’s adjusted earnings of 3 cents were on par with analysts’ estimates. Overall, this is an improvement from a year ago when the company reported a loss of $54.2 million, or 18 cents per share.
“Despite solid performance in North America, the top line fell short of our expectation,” Groupon Chief Financial Officer Jason Child told investors in an earnings call.
Groupon also missed its own estimates for the third quarter. In August, the company projected revenue in the range of $580 million to $620 million, and income of $15 million to $35 million.
Going forward, the company’s estimates for the fourth quarter also seem to outpace analysts’ expectations. Groupon is projecting revenue of $625 million to $675 million, the midpoint of which is higher than the $634 million analysts predict.
Groupon also reported 39.5 million active customers, up from 38 million in the second quarter and 28.9 million a year ago.
Groupon’s struggles will continue until it finds a way to separate itself from rival daily deal websites like LivingSocial, according to Larry Chiagouris, a marketing professor at Pace University.
“The competition from companies like LivingSocial and others is one of their biggest problems,” he said, “because to the consumer they all look alike. The consumer doesn’t see major distinctions between a Groupon deal and a LivingSocial deal. It’s a problem for all of them.”
Mr. Chiagouris said the industry as a whole is on a more solid footing, but there are too many companies competing with the same offers for the same customers. He said even competitors like McDonald’s and Burger King, or Pepsi and Coke, find ways to differentiate themselves.
But with daily deal websites “you get offered a deal, a certain percentage off, you have to act on it fast, those are all the same things, the same type of products,” he said. “They haven’t found a way to build customer loyalty.”
Slowing revenue growth is also a problem as the company looks to the future. Mr. Chiagouris blames this on the company offering cheaper deals than it used to, therefore, bringing in less money. He said Groupon at times suffered from rocky relations with top companies who were selling their products on the website, so they had to search for smaller companies and many of them sell less expensive products.
“Groupon is now finding it necessary to take on deals with merchants that have products for lower prices,” he said.
To expand its business, Groupon has been trying to establish itself as a local e-commerce company, transforming the market the way Amazon.com Inc. transformed online retail. It launched a payments service in September that lets businesses accept credit card payments using their iPhone or iPod Touch. The company has also expanded to selling physical goods such as electronic gadgets, housewares and clothes.
This article is based in part on wire service dispatches