Shares of Groupon (GRPN 4.18%), an online marketer and retailer, rose a swift 13% at the start of trading on May 7. By around 10:30 a.m. EDT, the stock had given back much of that advance, however, with the gain pared to 5%. The company's after-the-close earnings release on May 6 was the primary driver here. The numbers were kind of mixed.
Groupon reported revenue of $264 million in the first quarter of 2021. That was down 29% from the same period in 2020, but was enough to beat consensus estimates. On the bottom line Groupon posted adjusted earnings of $0.25 per share for the quarter, versus an adjusted loss of $1.63 in the same stanza of 2020. Analysts had been expecting a loss of $0.58 per share. Earnings were supported by cost-cutting efforts and a nearly 45% drop in marketing expenses, which could be seen as problematic for the future. But, on the whole, it was a decent quarter even though it wasn't exactly what you'd call a smashing success, noting the year-over-year top-line decline and the marketing reductions.
Looking out to the rest of the year, Groupon is working on increasing purchases and the number of offers and deals it has on its platform. That said, management specifically noted that it was positioned to provide strong results even if "the business returns to just 80% of 2019 gross profit levels." That's a positive on the one hand but a negative on the other, given it suggests that 2019 levels are still far off. Indeed, some industry watchers question whether the business model here is really sustainable over the long term.
Groupon spent a fair amount of time talking up its plans for the future in its earnings release, which is exactly what you would expect given the difficult backdrop here. And, to be fair, the first quarter was in some ways a good one. However, long-term investors should probably take some time to digest the big-picture story here and not get too caught up in one day's price action. Indeed, it looks like there are still major headwinds that need to be addressed.