RetailMeNot Gift-Card Sales Rescue Revenues, But Not Income

Gift-card sales helped coupon web site RetailMeNot Inc. boost revenues last year, but the gains weren’t enough to push net income higher.

The company, which went public in 2013, saw net revenue for 2016 grow by 13 percent to $280.4 million, but net income fell precipitously to $2 million from $11.8 million the previous year.

Although a double-digit increase in net revenue put RetailMeNot in rarefied air in the wider fashion industry, the company noted that revenue from its core segment of online coupons and discount codes dropped by 5 percent, leaving the $43.5 million in net revenue from its recently added area of gift-card sales to save the day.

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The company bought Giftcard Zen last April with a $22 million cash deal, plus up to an additional $11 million in deferred compensation based on the achievement of specific performance targets and continued employment of Giftcard Zen founder Aaron Dragushan.

At the time of the acquisition, RetailMeNot’s founder and chief executive officer, Cotter Cunningham, said the gift-card discounter “is a great fit” and would create “another meaningful way for RetailMeNot to fulfill our mission to help people save money.”

RetailMeNot also estimated at the time that about $44 billion in unused, closed-loop gift cards had accumulated in the U.S. between 2008 and 2014 and could have been made available for sale on the secondary gift-card market.

The company’s international presence made up for $48.7 million of net revenue, accounting for 17 percent of of total net revenue for core and gift-card sales in 2016.

RetailMeNot in March expanded into Spain and Italy with web site launches, adding to its presence in the U.S., Canada, the U.K., France, Germany and the Netherlands.

As for 2017, the company said it expects to revenue from its core business to drop another 7 percent by the end of the first quarter. Meanwhile, gift-card sales are expected to reach at least 13.5 million by the end of March, which if repeated every quarter, would put RetailMeNot gift-card sales well ahead of 2016.