One Company Is Beating Groupon at Its Own Game
Market sentiment turning on the former dot-com darling also doomed LivingSocial and the smaller rivals that were hoping to grow public in light of the initial excitement of Groupon's IPO.
However, there is a company in this niche that's doing just fine. There's a publicly traded player in the flash-sales game that's seen its shares nearly triple over the past year. Revenue more than doubled in its latest quarter, with earnings growing even faster. The rub is that it's not doing business in this country.
The VIP in Daily Deals
Vipshop (VIPS) isn't a household name here, but that's not the case in China, where it's a fast-growing provider of limited-time sales on discounted apparel. Vipshop checked in with fresh quarterly results on Tuesday night, and it was another blowout report.
Revenue soared 130 percent to $882.6 million since last year's third quarter, fueled by its customer count more than doubling. Closing in on $1 billion in quarterly revenue with 9.5 million active customers may seem like a lot, but keep in mind that we're talking about the world's most populous nation, with more than 1.3 billion people living in China.
Profitability grew even faster. Margins widened to the point where adjusted net income skyrocketed 207 percent to $46.3 million. Vipshop's sales and adjusted earnings exceeded analyst expectations.
Vipshop opened lower on Wednesday's report, largely on a sequential downtick in orders. This is the first time that it has clocked in with a quarter-over-quarter decline, but seasonality does factor into sequential swings. Looking ahead, Vipshop sees an 84 percent to 87 percent year-over-year spike in revenue for the current quarter. It will be the first time that Vipshop tops $1 billion in quarterly sales.
Checking In on Groupon
Groupon isn't exactly chopped liver. It saw its revenue post a 27 percent year-over-year gain to $757.1 million. International expansion helped pad the industry bellwether's performance, but Groupon still came through with a 16 percent gain in North America sales over the past year.
Investors have turned on Groupon because of its spotty profitability and slowing growth rate, but it's not as if the model itself is broken. Folks still crave deals, and Groupon has made the most of its growing Rolodex to approach its growing base of deal-providing merchants to offer them related business services.
However, anyone pulling up a stock chart of the investments knows that the disparity is real. Vipshop went public in early 2012, just a couple of months after Groupon's Wall Street debut. Unlike Groupon, which had a lot of buzz out of the gate, the market wasn't initially interested in Vipshop. It priced its IPO at $6.50, closing at $5.50 on its first day of trading.
However, Vipshop's penchant for heady top-line growth and strong earnings beats -- it has consistently exceeded analyst profit targets -- has made it one of the market's biggest winners. It recently went through a 10-for-1 stock split, adjusting its IPO price to $0.65. Lucky investors who got in on the IPO or even bought it for less the day after have seen their investment soar more than 30-fold.
The gains are unlikely to be as sweet in the future. Vipshop may still not be a household name for stateside shoppers, but growth investors willing to put up with the risks of buying into Chinese equities are already familiar with Vipshop. It's the company that beat Groupon at its own game.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. To read about our favorite high-yielding dividend stocks for any investor, check outour free report.