Groupon shares shoot up 27% after strong second quarter

The company named Eric Lefkofsky CEO and showed solid momentum

Groupon shares ballooned 27% to $11.11 Thursday morning after the company announced its second quarter earnings, which missed estimates but came with another important announcement: co-founder Eric Lefkofsky has been named CEO. Ted Leonsis has been named Chairman of the board.

Revenue came in at $608.7 million, well below the $621.6 million analysts were expecting, but in line with Groupon’s guidance of $575 to $625 million. Earnings per share were $0.02, just missing the $0.03 Wall Street was anticipating.

While revenue and income came in below expectations, analysts were uplifted by the CEO announcement and some solid momentum in Groupon’s North American business. North American gross billings were up 30% as the number of active deals increased to 54,000 from 40,000 from last quarter.

Additionally, active customers grew 12% year-over-year to 42.6 million. And while average customer spend worldwide remained flat at $138, customer spend in North America increased by $5 to $156 compared to $151 last quarter.

Now, nearly 50% of all North American transactions were made via mobile, compared to 30% in Q2 2012. More than 50 million people have downloaded the Groupon apps to date, with 7.5 million people downloading them in the second quarter alone.

Interestingly, Groupon’s efforts to “pull” customers in with better search features rather than push them through email seems to be working, as email accounted for less than 40% of North American transactions in the second quarter. “Pulling” customers in rather than pushing them is imperative to Groupon’s success as it leads to higher sales conversions and opens deals up to all users, rather than just subscribers.  

"We significantly exceeded our operating income expectations, and delivered our strongest quarter ever in North America, due in part to accelerated billings growth of 30%," said Lefkofsky, in a statement. “With two quarters on the job, I’m pleased with the progress we’ve made in such a short time.”

To underscore the company’s belief in the strength of its business going forward, the board has authorized a $300 million share repurchase plan. Stock will be repurchased over the next 24 months.

“GRPN’s execution with its “Pull” initiative in North America has been encouraging, with strong merchant adoption and consumer behaviour evolving in response to GRPN’s new Marketplace (mobile will remain a key tailwind here),” wrote Macquarie analyst Tom White in a research note. “Whether GRPN will be able to replicate these improvements outside the U.S., where its brand is less well-known and competition is more varied, remains to be seen.”

Image source: forbes.com