Groupon Inc. collapsed as much as 25 percent in extended trading after posting worse-than-anticipated figures and disclosing proposals to stop selling goods -- a pullback for an organization that once yearned to be a premier shopping company.
The company said its profits were down to 7 cents per share in its latest quarter, Tuesday. The decline missed even the most negative estimates by Wall Street observers. Earnings also plunged way below analysts' expectations.
Groupon said it gained revenue of around $612 million for the fourth quarter, which was well short of the $710 million that analysts were anticipating, Refinitiv data showed.
In its earnings report, Groupon chief executive officer Rich Williams stated that they did not deliver the financial performance they expected "and we recognize we must act swiftly to put the company back on a growth path."
Groupon's shares fell as low as $2.26 in the after-hours session after the figures were released. The stocks had been climbing around 28 percent this year until Tuesday's final bell, with investors betting the company could make a rally.
Groupon Goods, an online retail site was Groupon's attempt at enticing new clients and cut its dependence on its fundamental business -- selling daily promos and other discounts.
But the business's contribution to revenue has been down in the last four quarters, and customers have lost their enthusiasm, Groupon said. That's why the company is now considering scrapping the program this year.
Williams said the company's plan to phase out the products to concentrate on experiences will pave the way for "a stronger Groupon" this year. "Goods has outlived its part as an income-generator and has become a major drag on our operations," Williams said. The company has a market cap of $1.7 billion.
Groupon projected the highly fragmented local experiences market to be valued at "north of $1 trillion." And the company stressed it currently has just under 1 percent market share of local experiences.
It also has concluded it is not well-positioned at the moment for success in what Groupon referred to as "a saturated retail market."
Williams also stated that a change in perspective means that the company will emerge with a broader inventory, modernized product offerings, a new brand outlook, and "new options for merchants to tie-up with us, and a leaner organization."
Williams added that these transformations will be crucial to achieving the company's objective of reigniting growth.
