What happened

Shares of Groupon (GRPN 0.55%) tumbled on Wednesday after the company reported abysmal fourth-quarter results and announced that it would exit the goods category to focus on its local-experience marketplace. The stock was down about 41% at 2:05 p.m. EST.

So what

Groupon reported fourth-quarter revenue of $612.3 million, down 23% year over year and about $92.6 million below the average analyst estimate. Global units sold were down 16% to 42.6 million, driven by fewer customers and lower traffic. In North America, units were down 11% in the local business and down 32% in the goods business.

A declining chart.

Image source: Getty Images.

Non-GAAP (adjusted) earnings per share came in at $0.07, down from $0.10 in the prior-year period and $0.08 below analyst expectations. While revenue plunged, gross profit was down just 15%, and the company managed to slash marketing spending by 25%.

Following a review of strategic alternatives, Groupon has decided the exit the goods business entirely. The focus going forward will be the local-experiences market, which the company pegs at $1 trillion. The market is fragmented, with Groupon having less than 1% market share.

Groupon also announced a reverse stock split, at a ratio between 1-for-10 and 1-for-12. The proposal will be submitted for shareholder approval at the annual meeting in June.

Now what

For 2020, Groupon expects to launch a new mobile app, relaunch its brand, and grow North America local units starting in the second half. By 2022, the company expects high-single-digit percentage unit growth, mid-single-digit percentage revenue growth, and adjusted EBITDA margin in the high teens.

It's not surprising Groupon's plan landed with a thud -- even the North American local-business segment suffered a steep decline in units sold during the quarter. With the small-cap stock plummeting, the market doesn't appear optimistic about a turnaround.