Groupon Names Lefkofsky CEO as Business Rebounds

Groupon-LogoGroupon’s search for a new chief executive ended Wednesday evening with a familiar name: Eric Lefkofsky. During an earnings call Wednesday, the company announced that the firm’s long-time executive chairman, who has shared the leadership duties with Ted Leonisis since the company fired founder Andrew Mason in February, will take on the full responsibilities of CEO.

Shares of the deals giant soared nearly 20% in after-hours trading, as investors cheered the decision as well as stronger-than-expected sales growth in the second quarter. The company saw a 30% jump in billings from a year earlier in the North American market as gross profits grew sequentially for the first time in over year.

The newly minted CEO reiterated the company’s renewed focus on local, touching on opportunities to begin to connect its struggling e-commerce business with its high-margin local segment: “Everything we do is with local in mind,” Lefkofsky stressed during the earnings call. “Our Live business features local events, and with our getaway business features local hotels, and over time we’ll be localizing our goods platform by allowing our merchants to upload inventory, which they might want to sell to our national audience, and by allowing our vendors to offer local in-store pickup.”

Groupon CEO Eric Lefkofsky

The company’s local business in North America improved in almost every metric: gross billings, profit, and revenue each grew from the previous quarter. The take rate for the local segment — the percentage of a deal that the Groupon keeps — continued to stabilize in the second quarter at 39% after dipping to 33% in the fourth quarter of last year. Cost of goods sold continued to drop, pushing the margins up slightly and demonstrating solid operating leverage.

Meanwhile, the company’s e-commerce effort showed some signs of improvement, but continued to struggle. The Goods business saw profits rebound after a weak first quarter as billings jumped nearly 20% sequentially. However, the business continues to drag on the company’s bottom line, accounting for 87% of its cost of goods sold but less than 14% of gross profits.

After a blistering international expansion in 2010 and 2011, Groupon’s operations are still a mess outside of North America. The company did not comment on whether it has plans to leave underperforming markets as it tries to bring the same technology and workflow used in North America to its still-fragmented international operations.

The outstanding question for Groupon is whether it can compete locally while building out its other verticals. The Goods business, for instance, positions the company in an highly competitive market that shows little to no leverage with its core local operations. Meanwhile, the local commerce space has seen unprecedented activity in the past four months, and it’s unclear whether the company is focused and nimble enough to keep up.

Steven Jacobs is Street Fight’s deputy editor.