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Groupon Shares Plunge after Q4 Results (GRPN)

Daily deals site, Groupon Inc. (NASDAQ: GRPN) disappointed investors yet again as lower margins and rising sales and marketing costs in company’s new Groupon Goods business and decline in revenue from  international markets weighed on the financials, prompting the Company to provide lower than expected revenue guidance on the current quarter.

Following the release of quarterly results, shares plunged almost 26% in aftermarket hours on Wednesday to $4.43.

For the fiscal fourth quarter, the Chicago-based Company reported a net loss of $81.1 million, or 12 cents a share, falling short of analysts’ consensus estimate for  earnings of 3 cents a share.

Revenue during the period came in at $638 million, a 30% jump over the same period of last year, and matching analysts’ estimate.

In order to boost its Groupon Goods business, the company has been taking smaller fees/cuts—and as a result, margins are dwindling while sales and marketing costs are increasing which in turn is putting pressure on the bottom line. The Company cited these two factors behind operating loss in the fiscal fourth quarter.

In addition, Groupon Inc’s Chief Executive and founder, Andrew Mason, also said that stumbling growth in the international markets was also hurting the overall growth—notwithstanding its strong performance in the North American region.

“It was continued volatility in our international business that drove the weaker-than-expected profitability in the quarter;  We still have much work to do to bring our international operations to the same level of those in North America,” said Mason.

While revenue in overseas markets fell to 263.0 million, down from $312.5 million in the year ago period, revenue from North America came in at $375.4 million, up from $179.6 million, in the same period of last year. In the previous quarter, revenue for international market rose only 3% while revenue from North America leaped 81%.

Among Groupon Inc’s different revenue streams, sales from core ‘daily deals’ business  fell to $413.1 million from $478 in the same period of last year.

Revenue from Groupon Goods business rose to $ 225.2 million, up from $145 million in the preceding quarter and $13.7 million, in the year earlier quarter.

For the current quarter, Groupon expects revenue to come in the range of $560 million to $610 million, falling below Street’s estimate for $650 million.

Although the Company did not provide guidance on full-year results, it said that operating income is likely to be higher compared to 2012.

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