This photo illustration shows the logo of Canadian e-commerce company Shopify Inc. on a smartphone.
Thomas Trutschel | Getty Images
Shopify reported weaker-than-expected second-quarter results on Wednesday and warned that inflation and rising interest rates would hurt business in the second half of the year.
Here’s how the company did it:
- Earnings: A loss of 3 cents per share, adjusted, versus an expected profit of 2 cents per share as expected by analysts, according to Refinitiv.
- Revenue: $1.3 billion, versus $1.33 billion as analysts expected, according to Refinitiv.
Shares were up about 6% by mid-morning as tech stocks edged higher.
Shopify’s layoff announcement on Tuesday, and the subsequent drop in shares, appears to have “de-risked” its stock on Wednesday, said DA Davidson analyst Tom Forte, who has a hold rating on the stock . Comments from executives about efforts to rein in spending while continuing to gain market share in e-commerce may have eased some investors’ fears, Forte added.
The Canadian company, which helps business owners set up an online store, was a darling of the Covid-19 pandemic. When the pandemic forced brick-and-mortar stores to temporarily close, many retailers turned to Shopify to establish an online presence. That pushed Shopify stock to new highs and saw double-digit revenue growth for much of 2020 and 2021.
Investors are closely watching the earnings results of retailers and e-commerce companies to see how high inflation and the threat of a recession are affecting consumer spending habits. The latest warning came earlier this week when Walmart cut its profit forecast. Amazon will report second-quarter results on Thursday, and Etsy will report results on Wednesday after the market closes.
On Wednesday, Shopify said it now expects 2022 “to end up being different, more of a transition year, where e-commerce has largely returned to the pre-Covid trend line and is now under pressure from a persistent high inflation”.
He forecast that gross merchandise volume will be more evenly distributed across the four quarters, given pressure on consumer spending and currency headwinds from the stronger US dollar. Shopify also said it expects to post an adjusted operating loss for the second half of 2022.
The results come a day after Shopify said it was laying off about 1,000 employees, or about 10% of its global workforce, amid stagnant e-commerce growth. The announcement sent Shopify shares tumbling, and the stock closed up 14% on Tuesday.
Shopify CFO Amy Shapero said on a conference call with analysts on Wednesday that for the rest of 2022, the company intends to “slow down hiring to only the most strategic.” It will also reduce spending on “lower priority areas and non-core activities,” as well as targeted sales and marketing spending on “activities with shorter payback periods.”
“Shopify is committed to being extremely operationally efficient,” CEO Tobi Lutke said on the call.
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