Trivago shares tank on profit warning

Trivago shares tanked in pre-market trade on Wednesday after the hotel search site warned that its results for the third quarter and full year would be below previous expectations.

The company said it now expects annual revenue growth to be around 40% and adjusted earnings before interest, tax, depreciation and amortisation to be lower than 2016 but still positive. It attributed the downgrade to guidance to the negative impact on revenue per qualified referral (RPQR), which has led the company to pull back its performance marketing activity more than previously expected, resulting in a further slowdown in traffic and revenue growth from those channels.

"Due to the speed with which the above RPQR slowdown unfolded we were unable to pull back planned television advertising spend quickly enough to prevent overspend. As a consequence, we will have lower return on adverting spend (ROAS) in July and August and adjusted EBITDA margins in those months have been negatively impacted. Note that we do expect ROAS to stabilise over time with an adjustment of brand marketing expenses."

Other factors denting the group's performance include difficult revenue comps as results for the summer period of 2016 were exceptionally strong compared to 2015 and 2014 and the impact of recent weakness in the US dollar and other currencies versus the euro.

"Although the above factors represent near term challenges, we remain unwavering in our belief in the medium to long-term potential of the business."

US-listed shares of Trivago were down 20% to $11.93 in pre-market trade.