Groupon Restates Earnings After Seeing a Spike in Holiday Returns
Groupon has revised its results for the fourth quarter due to higher-than-expected return rates during the holiday period.
The revision, which is not the company’s first, sent the stock tumbling by around 7 percent to $17.05 a share in after-hours trading.
In a release filed with the Securities and Exchange Commission, the company said it lowered its fourth-quarter revenue by $14.3 million, and its net income by $22.6 million. The daily deals giant is now reporting a wider net loss of $64.9 million on revenue totaling $492 million.
Groupon’s revision reflects just how unpredictable the business is, and how little is known about how changes will affect its performance. It clearly did not know, or did not want to admit, how much offering slightly higher-end deals would affect its financial model.
But companies in this stage of development are not typically public, or at this scale, and therefore can usually make these errors in private.
Still, there is some light at the end of the tunnel.
Despite these higher-risk models being put into place, the company reaffirmed guidance for the first quarter, meaning that it was able to perform better than it was expecting.
In the first quarter, it is still expecting revenue of up to $550 million, and net income from operations of up to $35 million.
A Groupon spokesman explained that the revision was necessary because the mix of deals in the fourth quarter changed. Due to higher-end offers, such as Lasik eye surgery, it experienced a higher return rate.
Going forward, it will maintain a higher reserve to account for the more expensive offers.
The company also caught another break. The lockup period for selling shareholders has been extended to June 1 from May 2, due to a technicality. The underwriters and certain holders are not allowed to unload the stock within a 16-day period of material news. The company is now releasing its first-quarter results on May 14.