Groupon Inc’s quarterly revenue rose a faster-than-expected 7.5 percent after the company’s North American daily deals business turned in a strong performance, stirring hopes that the struggling company may have begun to turn things around.<\/p>\n
Shares in the company, one of the most feted Internet market debutantes of 2011 before daily deals mania cooled, climbed almost 10 percent in after-hours trade. They have gained about 40 percent since the February ouster of co-founder and former CEO Andrew Mason, who was criticized for lacking the experience to run an increasingly global, public company.<\/p>\n
Wall Street was cautious ahead of Groupon’s results, so the company’s “solid” performance triggered a particularly big gain in Groupon shares on Wednesday, analysts say.<\/p>\n
“Margins came in better and they are re-affirming their full-year income guidance. It could have been worse,” said Ken Sena, an analyst at Evercore Partners.<\/p>\n
Groupon has been trying to revive a sluggish European business, while juggling the fast-rising cost of ensnaring new customers, and merchants to partner on Internet coupons for everything from spa treatments to fine dining.<\/p>\n
The Chicago-based company finally fired Mason in February after a string of disappointing results wiped out three-quarters of its market value since its 2011 IPO.<\/p>\n
On Wednesday, it reported first-quarter revenue rose to $601.4 million from $559.3 million a year earlier, surpassing the $590 million analysts had expected, according to Thomson Reuters I\/B\/E\/S.<\/p>\n
Consolidated segment operating income, or CSOI, a closely watched measure of Groupon’s profitability, came in at $51.2 million in the latest period. Mark Mahaney, an analyst at RBC Capital Markets, was expecting CSOI of $26 million.<\/p>\n
Its North American revenue rose 42 percent, while international revenue fell 18 percent.<\/p>\n
Groupon, which has lost several other key executives, is on the lookout for a new permanent chief executive. Interim co-CEOs Eric Lefkofsky and Ted Leonsis continue to grapple with its struggling European business, while expanding in the United States.<\/p>\n
Lefkofsky, who co-founded Groupon with Mason and is chairman, led the earnings conference call with analysts for the first time, acknowledging missteps and announcing a “new chapter” focused on the company’s local commerce roots.<\/p>\n
Analysts expect a slimmed-down company under new leadership.<\/p>\n
“At times as an organization we spread ourselves too thin and fail to focus on the things that will have the greatest impact,” Lefkofsky said.<\/p>\n
Groupon has been building an online deal marketplace called Pull that lets people search for and buy deals in their area. This is a big change from Groupon’s original business, which sent a daily email to subscribers offering one or two deals.<\/p>\n
Emails accounted for less than 45 percent of North American transactions in the first quarter, suggesting the Pull marketplace is gaining momentum. A Groupon spokesman declined to say how many transactions came from online searches.<\/p>\n
Lefkofsky said the marketplace approach has potential because more people are carrying smartphones and can search for what they want to do and buy locally as they move around.<\/p>\n
About 45 percent of North American transactions came from mobile devices in March, up from about 20 percent two years ago, Lefkofsky noted.<\/p>\n
That Pull marketplace however needs a lot of merchants to offer deals for longer periods, something Lefkofsky said the company was making progress on.<\/p>\n
At the end of March, Groupon was offering almost 40,000 active deals from merchants in North America, up from about 1,000 when the company went public in late 2011.<\/p>\n
Lefkofsky said that over half of Groupon’s local transactions in North America came from this “deal bank” of longer-term merchant offers. In March more than 60 percent of the contracts Groupon signed with merchants were for longer-term deals, he said.<\/p>\n
For now, Groupon’s board of directors has formed a special committee that has begun a search for a new chief executive for the company, interim co-CEO Ted Leonsis said on Wednesday.<\/p>\n
RBC’s Mahaney said Lefkofsky did a “nice job” on the conference call and asked if he was interested in the full-time CEO role. The co-founder did not respond, asking Ted Leonsis, Groupon’s other interim CEO, to chime in.<\/p>\n
The current leadership team is “gelling very very nicely,” giving the search committee more time to find “the ideal long-term CEO,” Leonsis added.<\/p>\n
Groupon spokesman Paul Taaffe said Lefkofsky has not put himself forward as a candidate and is not being considered by the committee for the role.<\/p>\n
Leonsis is leading the search committee, which Lefkofsky will not be on. Groupon’s Taaffe declined to say who else is part of the group.<\/p>\n
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