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How Will Retrenching 95 Employees Impact Groupon?

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Apr. 4 2017, Published 10:40 a.m. ET

30 LivingSocial employees going home in April

If a recent report by The Washington Business Journal is accurate, this month, Groupon (GRPN) will be laying off ~30 of the employees it inherited through last year’s acquisition of fellow daily deals provider LivingSocial. The ~65 remaining LivingSocial employees are set to leave the company later in the year, according to the report. Additionally, Groupon is closing the LivingSocial office in Washington, D.C.

These moves seem to be cost-control measures by Groupon, as it’s recently been struggling to its grow its revenue and generate profits amid soaring expenses.

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Potential impact of the layoff

Laying off 95 LivingSocial workers could help Groupon to reduce its payroll burden, lowering its operating expenses and creating room for margin improvement.

Groupon’s operating expenses soared to $3.2 billion in 2016, leading the company to a net income of -$194.6 million in the year, compared to a net income of $20.7 million in 2015. The company’s annual operating expenses have trended upward in recent years, as we can see in the chart above.

Customer acquisitions

Groupon acquired LivingSocial to help grow its customer base, and the company expected 1.0 million new active customers to join its network courtesy of LivingSocial. The company is focused on growing its business in North America after burning millions of dollars (UUP) in an unsuccessful global expansion drive.

Groupon’s North American push seems to be paying off. The company said it gained more than 5.0 million new customers in the region in 2016, its highest annual customer addition in four years.

However, Groupon still has to watch its back for competition from the likes of Overstock.com (OSTK), RetailMeNot (SALE), and Yelp (YELP).

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