Groupon Inc. reported a decrease in shares of over 1% in aftermarket trading on Wednesday, following the announcement of mixed quarterly results and a statement that it is “facing serious challenges” in remaining operational. The deals and coupons company has been struggling due to the widespread economic downturn caused by the COVID-19 pandemic, and the future of the company remains uncertain.
In the first quarter, Groupon reported a loss of $29 million, or 95 cents a share, compared with a loss of $34.4 million, or $1.17 a share, in the same period last year. Groupon has been going through a restructuring plan since January, which included the appointment of a new CEO in March, and has kept a going-concern warning in its filings. The company is currently weighing several strategies to improve liquidity and remain afloat amid the crisis.
Although Groupon has faced troubled times in recent years, the COVID-19 pandemic has exacerbated the company’s issues. As a result of forced business closures and social distancing measures, consumer demand for Groupon’s services has plummeted. However, this decline in usage coincides with a simultaneous increase in refund requests, putting the business under even more financial pressure.
Even before the pandemic, Groupon has been undertaking efforts to revitalize its business model, starting with the restructuring in January. However, the virus outbreak has significantly impacted the progress of this plan, and without substantial measures to address the current situation, it is unclear how long the company will be able to stay afloat.
One significant factor affecting the future viability of Groupon is the duration of the pandemic and how long it will take for the world to return to normal. In addition to refund requests and declining usage, the business has also had to deal with delays in payments from partners during the crisis. With an uncertain timeline for economic recovery, it is impossible for Groupon to predict when its financial situation will improve, if at all.
While many businesses have pivoted to offering digital services or products to stay operational during the pandemic, Groupon has found this transition more difficult due to the nature of its business. The company primarily deals with experiences, events, and local businesses, all of which have been hit the hardest by the coronavirus outbreak. In essence, Groupon’s business model hinges on consumers venturing out and spending money in their local communities, something that has been almost entirely halted during the pandemic.
Furthermore, Groupon’s reputation has taken a hit during the crisis, with many consumers and businesses becoming more skeptical of the company’s reliability given the questionable sustainability of its operations. Rival companies, such as LivingSocial and Travelzoo, have likewise experienced financial difficulties during the pandemic, further contributing to the uncertainty surrounding Groupon’s future.
In a bid to improve its financial situation, Groupon has taken cost-cutting measures, including layoffs, furloughs, and reducing hours for employees, and it has also ceased all non-essential travel for staff. The company has also applied for aid through government relief programs, though it is not yet clear how much funding Groupon will receive as part of these initiatives.
As part of its ongoing evaluation of strategies to improve liquidity, Groupon is reportedly exploring various options in collaboration with its financial advisors. These options may include raising additional capital through equity or debt financing, divestitures of certain assets, or even a potential merger or acquisition.
Ultimately, the future of Groupon depends on a combination of factors, including the duration and severity of the pandemic, the effectiveness of the company’s restructuring efforts, and the success of its strategies to address the current financial crisis. The company will need to act quickly and decisively to ensure that it can stay afloat and come out of the pandemic stronger than ever.
Despite the challenges it faces, Groupon has proven its resilience in the past, and if it can successfully navigate the unique challenges of the COVID-19 crisis, it may be able to leverage its position as a leader in the deals and coupons space to rebound in the coming months and years. However, without the ability to predict how long the pandemic will last or when consumer demand will return to normal levels, the future of Groupon remains uncertain for now.
