More than a year ago, shortly after then-new Groupon Inc (NASDAQ:GRPN) CEO Rich Williams took the helm, yours truly penned a rather scathing response to a veiled jab from Williams … a jab aimed at analysts, investors and even consumers.
That jab? Read it for yourself:
“Groupon is a misunderstood company. We’re misunderstood by analysts. We’re misunderstood by media. We’re misunderstood by consumers – both those who haven’t visited our site in awhile and those who’ve never purchased from us.”
The assessment came on the heels of a 69% pullback from Groupon stock in just ten months…a pullback Williams believed was ultimately rooted in the rest of the world’s understanding of anything the company was, and was doing.
Well, here we are, with four full quarters logged under Williams’ leadership. Has he managed to prove to anyone that GRPN was the misunderstood victim he said it was a year and three months ago? Not really.
Going Nowhere Fast
Slice it anyway you want … you can’t identify any meaningful semblance of progress from Groupon since Williams took the helm. Revenue has been up slightly in most of the quarters since his blog post, but not tremendously. Gross profits shrank in three of the four quarters completed since then.
Perhaps most alarming of all, net losses have not only become more likely, they’ve generally gotten bigger since Williams took over. Our chart below tells the tale.
The salt in the wound: Thanks to stock buybacks, the number of GRPN shares in circulation now is only 571 million shares, down 10% from a year earlier. The growing per-share loss still doesn’t fully illustrate the scope of the problem.
Maybe, just maybe, consumers, the media and analysts understood exactly what the company was and why Groupon stock is essentially un-ownable, Rich.
In his defense, however, GRPN closed shop in Sweden, Denmark, Norway and Finland right around the time Williams was named chief executive, so right off the bat he was facing a relative headwind. The company grew the top line, in spite of leaving certain markets in the meantime.
On the flip side, GRPN presumably left those markets because they weren’t profitable, were too distracting, or both. As tepid as revenue growth has been, the fact that gross profits, as well as net income, deteriorated anyway says shedding those overseas units has done nothing to help. It’s a step in the wrong direction from Williams’ aim, too:
“We are moving away from empty calories in Shopping. We will no longer emphasize the higher revenue but lower margin consumer electronics business that we believe isn’t required in order to grow a sustainable, healthy Shopping business with stronger margins.”
So far, margins are anything but stronger.
Bottom Line for Groupon Stock
Just for the record, I’m not calling Rich Williams a liar, nor am I saying Groupon is doomed. I’m sure Williams felt then, and continues to feel now, that his company can be turned around. Indeed, I’d even be the first to say it may take more than a year to get the job done.
On the other hand, considering the boldness, confidence and inherent brashness of calling analysts/onlookers “lazy” a little over a year ago, one would have thought Williams knew exactly what to do to fix the company’s troubles. And, one would have thought those woes would have been resolved like flipping a switch. This hasn’t been the case… at all.
It begs the question — what’s the holdup on sales and profit growth? The answer is (and this going to be tough for GRPN stock holders to digest), the premise itself.
The reality is, Groupon isn’t a shopping destination. It’s a website consumers visit as something of an afterthought. When they want a toy, they visit the Toys R Us site. When they want electronics, they go to BestBuy.com. When they want something to do, they’ll visit TicketMaster. If people just want an idea for a gift, they’ll go to Amazon.com. When they’ve got little else to do, that’s when they might visit GRPN to see if there’s a deal worth having.
See, Groupon just doesn’t have a good enough selection to make it a primary shopping destination.
Until Williams sees and accepts that, and adapts accordingly, Groupon stock is poised to struggle. Perhaps he should focus more on that than writing 1,684-word blog posts that point the finger at everyone besides himself and his company.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.