What To Expect From Groupon’s Q1 Results

by Trefis Team
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Groupon (NASDAQ:GRPN) is expected to report its earnings for the first quarter of 2017 on Wednesday, May 3rd. In Q4 2016, Groupon reported 2% year-over-year (y-o-y) growth in revenue to $935 million driven by solid growth in North America. Its adjusted earnings were 7 cents per share against consensus estimates of 2 cents per share. The company’s strategy to focus on the North American market and move away from certain low-margin goods businesses seems to be bearing fruit, and we expect Groupon to further consolidate this year.

In the upcoming Q1 results, overall sales are expected to remain flat, owing to improving North American sales but likely to be offset by declining international gross billings. Groupon is expected to report revenues of around $731 million and zero earning in Q1 2017, per consensus estimates compiled by Reuters.

What To Watch Out For:

  • North America Revenues

North America, which has been the primary area of focus for the company, reported revenues of about $651 million for the quarter, an increase of 4.5% on a y-o-y basis. The renewed focus on North America led to an addition of 2 million unique customers during the quarter, including 1 million customers added from LivingSocial. For Q1 2017, we expect North America revenue to report growth in mid-single digits even as international sales continue to decline.

  • Active Users

Groupon’s growing marketing spend helped increase its active users in North America and the EMEA region from 40.6 million at the end of September 2015 to 46.6 million at the end of December 2016.grpn-58

The effectiveness of Groupon’s marketing expenses can be gauged from the fact that the marketing spend per new user per quarter declined from over $119 in Q3 2015 to $44 in the fourth quarter of 2016. This data suggests that Groupon’s current focus seems to be on increasing its active customer base rather than improving individual customer sales. It will be interesting to see how this metric changed in the upcoming first quarter results.

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