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Groupon Announces Plans to Cut Workforce

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Oct. 2 2015, Updated 8:09 a.m. ET

Groupon to reduce global workforce 10%

Groupon (GRPN), a deal-of-the-day website, has announced plans to cut about 1,100 jobs globally, or about 10% of its workforce. The move comes amid slow customer growth and the ongoing struggle to add inventory that delivers high margins.

The move is part of the company’s strategy to restructure its international business. Groupon failed to meet analysts’ expectations in the second quarter of 2015 and reported adjusted loss per share of $0.03 for 2Q15 compared to analysts’ estimates of $0.02 per share.

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The company’s active users increased 6% year-over-year to 48.6 million. Groupon also sold its stake in Ticket Monster, a South Korea–based (EWY) mobile commerce company, for $360 million. This resulted in the addition of $0.21 per share, as the sale resulted in an important return on the business group.

According to the above graph and a report from Zacks Investment Research, with the exception of 4Q14, Groupon’s adjusted EPS (earnings per share) is negative for the last few quarters of fiscal 2015.

Groupon’s success

Since its launch in 2008, Groupon has showcased immense growth in its visibility around multiple cities and its user base. In 2011, Forbes listed Groupon as the fastest-growing company. The same year, Groupon filed for a $750 million IPO (initial public offering) after turning down a $6 billion offer from Google (GOOG) to acquire it.

However, after its 2011 IPO, the company began to report losses each quarter, resulting in a current 42% fall in its share price.

Groupon has faced tremendous competition from e-commerce giants such as eBay (EBAY) and Amazon (AMZN), which are becoming the first choice of merchants due to the lucrative services offered. For example, eBay Deals has been a highly successful service, offering benefits to customers such as convenient ordering, free shipping, and low prices.

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