Monday, April 2, 2012

Groupon Inc (NASDAQ: GRPN)

Shares of Groupon are dropping Monday, after the company announced a revision of fourth quarter revenues. Groupon had reported a loss of $37 million for its fourth quarter, but on Friday the company further reduced the quarterly revenue by $14.3 million and net income by $22.6 million, after discovering that executives had failed to set aside enough money for customer refunds.

Launched in 2008, Groupon "features a daily deal on the best stuff to do, see, eat, and buy" according to its website. It earns revenue by offering discounted deals to its subscriber base and splitting the value of the deal with the merchant that offered the deals. While revenue has been growing, rising from $313 million in 2010 to $1.62 billion in 2011, Groupon still reported a negative income in 2011, as it has for every year in operation and all past four quarters.

The recent announcement was concerning for Groupon, which has been trying to build confidence with investors. The revised numbers correspond to the first quarter as a public company, and on top of reliability issue comes from the more-than-expected refunds. In explaining the revision, Groupon has explained that the company's move to offer more high-price deals has lead to a higher volume of refunds. Shares of Groupon has dropped over 11% today to 16.28 currently.

Sources:
Posted by at
Labels: ,