Groupon (GRPN) widened its fourth-quarter loss and posted disappointing sales and a bleak outlook on Wednesday as cash flow tumbled sharply and margins were squeezed by inventory buildup.

The daily deals site projected a sequential decline in revenue for the current quarter, forecasting sales in the range of $560 million to $610 million, which is far below the consensus view of $650 million.

Shares of Groupon fell as much as 25% after hours to $4.57 following the results.

The Chicago-based company posted a fourth-quarter loss of $81.1 million, or 12 cents a share, compared with a year-earlier loss of $65.4 million, or 12 cents. The results were below average analyst estimates of a 3-cent profit.

“Groupon promoted direct (Goods), tied up money in inventory, and its quarter-over-quarter gross margin sank 2,470 basis points,” said Abe Garver, managing director of BG Strategic Advisors.

Revenue for the three months ended Dec. 31 climbed 30% to $638.3 million from $492.2 million a year ago, but missed the Street’s view of $650.3 million. Operating cash flow decreased 61% year-over-year.

Groupon CEO Andrew Mason said the daily deals site will continue to focus on investing in growth through 2013.

"We see new opportunities to give our customers what they want,” he said.

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