AUSTIN, Texas — Back on July 19, 2013, confetti fell and champagne flowed as RetailMeNot employees celebrated the company’s successful debut as a publicly traded company.
Wall Street gave the online coupon company’s initial public offering a warm welcome, with shares surging almost 32 percent in first-day trading to close at $27.71.
As RetailMeNot employees gathered to celebrate, CEO Cotter Cunningham took the stage and told them: “Try to resist looking at the stock ticker all day. We’ve got great opportunities ahead, but much, much work to do.”
Nineteen months later, it’s evident what good advice that was. Shares of RetailMeNot have plummeted in recent months, and are currently trading at about $17.30, down about 38 percent from that first day of trading.
The fall of the company’s share price follows two quarters of revenue projections that fell short of analysts’ expectations. In February, in its fourth quarter earnings report, RetailMeNot projected full-year revenue for 2015 of $275 million to $285 million. That was well short of the $305.3 million that Wall Street had been expecting.
RetailMeNot expects adjusted earnings of $92 million to $100 million for the year, below analysts’ expectations of $104 million.
Both company officials and industry analysts say RetailMeNot is dealing with a key shift in the market. The company’s online coupon users have moved from desktop computers to mobile phones faster than anyone expected, and that has changed the company’s revenue proposition, Cunningham said in an interview.
“We’re going through a transition,” Cunningham said. “Interestingly, the consumer is ahead of the industry this time. Consumers have made the shift to mobile, and the industry is still trying to catch up with them.”
Founded in 2009 as WhaleShark, the company has become the world’s leading online marketplace for coupon and consumer deals, mostly by buying smaller websites. In 2010, it bought RetailMeNot, an Australian company that built one of the largest coupon sites in the world. The company changed its name to RetailMeNot three years later.
Today, the company’s sites provide more than 500,000 coupon codes, free trials and other retail offers from more than 70,000 merchants.
RetailMeNot, whose customers include Macy’s, Nordstrom, Wal-Mart and Target, receives a commission, usually averaging 5 percent, from a merchant if a shopper uses one of its coupons.
Since launching its location-enabled app in 2012, RetailMeNot’s user base has grown rapidly. In the fourth quarter, the company reported 21.2 million monthly mobile unique visitors, up 80 percent from a year ago.
“We don’t have a traffic problem. We have amazing traffic on the mobile device already — the consumer is there,” Cunningham said. “For us, it’s a monetization problem. It’s making sure we get credit for the sales we’re driving now.”
Blake Harper, an analyst with Wunderlich Securities, agreed that the company’s biggest challenge is figuring out ways to make more money from mobile.
“Any online company would love the mobile audience and mobile growth that they have, but they’re only monetizing it at about 20 to 25 percent of the level of the desktop,” Harper said. “It’s time to ramp that up.”
In some cases, it’s as simple as tweaking RetailMeNot’s technology, Harper said. One issue, he said, was that users were getting RetailMeNot coupon codes from their mobile phones and using them to make purchases from their desktop computers. Because of coding issues, the company wasn’t getting credit for the sales.
In a recent research report, Cunningham said the company is making technical changes and also increasing its sales force by 50 percent this year in an effort to increase mobile revenue.
Another mobile push involves a partnership announced last April with Chicago-based shopping mall developer General Growth Properties.
The deal makes RetailMeNot the digital coupon provider for the company’s 120-some malls. That allows merchants to use wireless technology to make special mobile offers to shoppers who are nearby.
Up to 90 percent of retail sales are still done in physical stores, and only 10 percent through e-commerce. If RetailMeNot can help merchants use smartphones to connect with shoppers when they’re in the store, that’s a big opportunity, said Sucharita Mulpuru-Kodali, who follows e-commerce for Forrester Research.
“RetailMeNot is in a rapidly evolving space and as far as I can see they’re doing a great job of trying to stay ahead of the curve,” Mulpuru-Kodali said. “I think it’s a matter of time before Wall Street recognizes that they’re well positioned for the future and they should have growth ahead of them for the foreseeable future.”
Cunningham said he expects the company’s mobile efforts to begin paying off by mid-year, but he will continue to encourage employees not to dwell on the company’s stock performance.
“We’ve always worked really hard not to make this a story about the stock, but instead about where we’re trying to go,” Cunningham.
