Groupon Plans To Slash 10% Of Employees, Leave Seven Countries

• Shares of Groupon Inc GRPN fell 2.16 percent on Tuesday.
• The decline seems to have been triggered by the announcement that the company will cut almost 10 percent of its workforce.
• The firing of 1,100 employees is part of a restructuring plan for its international operations.

Groupon on Tuesday said that, over 2016, it will exit seven countries (Morocco, Panama, the Philippines, Puerto Rico, Taiwan, Thailand and Uruguay) and cut roughly 1,100 jobs as part of a restructuring plan of its global operations. As of the end of last year, the company disclosed it had approximately 12,000 employees.

COO Rich Williams explained, “We decided to exit a number of countries where the required investment and market potential don’t align.”

Management said it estimates this 10 percent reduction in its workforce will result in pretax charges of roughly $35 million – for severance and other compensation benefits. In the current quarter, the expense could already reach $24 million, the company said. On the other hand, investors will have to wait until next year to see some of the cost savings of the restructuring, as management warned that the benefits will be “immaterial” in 2015.

According to a regulatory filing, Groupon expects the reduction in its workforce to be mostly completed by September 2016.

Sterne Agee & Leach Inc. analyst Arvind Bhatia said the restructuring could have been driven by the company’s inability to sell some of its businesses in the markets it now plans to exit.

“They were originally in more countries than Amazon was,” the analyst added. “It didn’t make any sense.”

Disclosure: Javier Hasse holds no stakes in any of the securities mentioned above.