In this photo illustration, the logo of Canadian e-commerce company Shopify Inc. is displayed on a smartphone.
Thomas Trutshell | Getty Images
On Wednesday, Shopify reported weaker-than-expected second-quarter results and warned that inflation and rising interest rates would weigh on business in the second half of the year.
Here’s how the company fared:
- Earnings: An adjusted loss of 3 cents per share compared with an expected profit of 2 cents per share, as expected by analysts, according to Refinitiv.
- Income: $1.3 billion versus $1.33 billion, as analysts expected, according to Refinitiv.
Shares closed up 11.7% on Wednesday as tech stocks rallied.
Shopify’s layoff announcement on Tuesday and the subsequent drop in shares appeared to have “de-risked” its stock on Wednesday, said Tom Forte, an analyst at DA Davidson who has a hold rating on the stock. Comments from executives about efforts to contain costs while continuing to capture market share in e-commerce may have allayed some investors’ fears, Forte added.
The Canadian company, which helps business owners set up shop online, has been a darling of the Covid-19 pandemic. When the pandemic forced brick-and-mortar stores to close temporarily, many retailers turned to Shopify to establish an online presence. That shot Shopify stock to new highs, and it posted double-digit revenue growth for most of 2020 and 2021.
Investors are closely watching the earnings results of retailers and e-commerce companies to see how higher inflation and the threat of a recession are affecting spending habits. The latest warning came earlier this week when Walmart cut its profit forecast. Amazon is due to 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 a different, more transitional year where e-commerce has largely returned to the pre-Covid trend line and is now being squeezed by persistently high inflation.” .
Gross merchandise volume is forecast to be more evenly spread across the four quarters, given pressures on consumer spending and currency headwinds from a stronger US dollar. Shopify also said it expects to generate an adjusted operating loss for the second half of 2022.
The results come a day after Shopify said it was cutting about 1,000 jobs, or roughly 10% of its global workforce, amid stagnant e-commerce growth. The announcement sent Shopify shares tumbling, and the stock closed down 14% on Tuesday.
Shopify CFO Amy Shapero said on a conference call with analysts on Wednesday that through the end of 2022, the company intends to “slow down hiring to only the most strategic.” It will also reduce spending in “lower priority areas and non-core activities” and direct sales and marketing spending to “activities with shorter payback periods.”
“Shopify is committed to being operationally highly efficient,” CEO Toby Luttke said on the call.
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