Priceline Group Inc. (NASDAQ: PCLN) reported the first quarter financial result on Wednesday morning, stock price slumped 9.97% to $1,219.52 during early trading. The company warned investors its profit growth would slow sharply in next quarter, the first challenge for interim Chief Executive Jeffery Boyd as he searches for a permanent successor.
According to the earnings announcement, profit jumped up 21% during the first quarter to $2 billion with international operations accounting for the bulk of the gain. Priceline ended the period with a gross profit rate of 20.8% compared with 18.9% last year. Total gross bookings increased 20.9% to $16.653 billion. Hotel room units sold showed the biggest increase in the quarter with a 31% year to year pop.
Chairman of the Board, Jeffery Boyd said spending on advertising would also pressure the company’s profitability as the company spends more to promote its Booking.com brand.
“I don’t think that the deceleration we’re pointing to here has really anything to do with competitive factors in the marketplace,” Mr. Boyd said during a conference call with analysts. “We feel very comfortable that we’re holding or gaining share.”
Priceline outlook the next quarter adjusted earnings per share between $11.60 and $12.50, well below the $14.98 that analysts polled by Thomson Reuters were predicting. It also forecast revenue growth of between 7% and 14%, compared with Wall Street’s expectation of 16%.
Priceline’s revenue growth dipped below 10% last year and reached 8.7% in the fourth quarter which was the weakest rate during recent decade. Much of that slowdown came from the euro’s sharp drop in value against the dollar, which trimmed the value of Priceline’s dollar-denominated results.
Most of Priceline’s growth in recent years has come from Amsterdam-based Booking.com, which has a heavy presence in Europe. Overseas business accounted for about 86% of the company’s gross profit last year.