Shares of online retail services provider Groupon (NASDAQ: GRPN) rose a quick 16% or so in early trading on Nov. 5. The main impetus for the advance was the company's pre-market earnings release. However, by about 11 a.m. EDT the stock was up only about 8%, having given up around half of its earlier gain.
Groupon is still working through a material business transition, and its financial results are tough to read because of it. From a top-line perspective, revenues in the third quarter of 2021 fell 30% year over year. However, this was largely related to the company's shift away from selling physical products itself. Selling products directly to consumers results in higher sales figures but also increases the cost of goods sold, since Groupon has to buy the inventory it sells. Thus gross profit was up 13% compared to the same period in 2020 because of a huge drop in product costs. To put a number on that, the cost-of-revenue line item on the earnings statement fell from just shy of $144 million in the third quarter of 2020 to a little under $34 million in 2021. That's a pretty big shift in the company's business approach.
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Why Groupon's Stock Jumped 16% in Early Trading Today