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Groupon Divests Malaysia Business, Restructuring On Track

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Daily deals provider Groupon Inc. (GRPN - Free Report) continues to exit international markets as a part of its restructuring plans. Fave platform developer KFit Group – which acquired Groupon Indonesia in August – recently acquired Groupon Malaysia. However, financial terms of the transaction were not disclosed.

Last September, Groupon announced the restructuring plan under which it not only started reducing headcount in North America but also exited certain international markets. Over the last nine months (ending Sep 30, 2016), Groupon ceased operations in six countries within its Rest of World segment and 11 countries within its Europe, the Middle East and Africa (EMEA) segment.

The exit from non-core markets is expected to aid Groupon focus on its key growth areas. The company now operates in 26 countries across the globe, down from 47 countries that it operated in the beginning of 2015. Groupon further plans to exit 11 non-core countries going ahead.

Further, the shopping business (Groupon Goods) has being restructured with the lower-margin (specifically empty calories products) being de-emphasized to increase focus on higher-margin healthy food offerings.

The positive effect of the restructuring plan has started reflecting in financial results. Groupon’s third-quarter 2016 adjusted loss (including stock-based compensation and tax impact) of 6 cents per share came in narrower than the Zacks Consensus Estimate of a loss of 8 cents.

Revenues of $720.5 million beat the Zacks Consensus Estimate of $708 million and inched up 1% on a year-over-year basis. Notably, North America revenues increased 4.2% from the year-ago quarter, driven by higher billings (up 10%) and local revenue (up 8%).

Moreover, the stock-price has surged significantly on a year-to-date basis. Groupon’s share price has increased almost 30% as compared with Zacks Electronic Commerce Industry’s gain of 10.7% during the period.


We believe that the successful execution of the restructuring plan will ensure strong top-line growth for Groupon going ahead. The company’s focus on reducing cost will eventually improve its margins and profitability.

However, higher investments on marketing spend can impact its financials in the near term. Moreover, Groupon Goods face stiff competition from giants like eBay (EBAY - Free Report) and (AMZN - Free Report) , which is a headwind.

Zacks Rank & Key Picks

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