In this photo illustration the logo of Canadian e-commerce company Shopify Inc. is displayed on a smartphone.
Thomas Trutschel | Getty Images
Shopify on Wednesday reported weaker-than-expected results for the second quarter, and warned that inflation and rising interest rates would weigh on the business in the second half of the year.
Here’s how the company did:
- Earnings: A loss of 3 cents per share, adjusted, vs. an expected gain of 2 cents per share as expected by analysts, according to Refinitiv.
- Revenue: $1.3 billion, vs. $1.33 billion as expected by analysts, according to Refinitiv.
The stock was up about 6% as of mid-morning as tech stocks rallied.
The Canadian company, which helps business owners set up a store online, was a Covid-19 pandemic darling. When the pandemic forced physical stores to temporarily shutter, many retailers turned to Shopify to establish a presence online. That propelled Shopify’s stock to new highs, and it saw double-digit revenue growth throughout much of 2020 and 2021.
Investors are closely watching earnings results from retailers and e-commerce companies to see how elevated inflation and the threat of a recession are impacting consumer spending habits. The latest warning came earlier this week when Walmart slashed its profit forecast. Amazon is set to report second-quarter results on Thursday, and Etsy will report results on Wednesday after market close.
On Wednesday, Shopify said it now expects 2022 “will end up being different, more of a transition year, in which ecommerce has largely reset to the pre-Covid trend line and is now pressured by persistent high inflation.”
It projected gross merchandise volume will be more evenly distributed across the four quarters, given pressure on consumer spending and currency headwinds from the stronger U.S. dollar. Shopify also said it expects to generate an adjusted operating loss for the second half of 2022.
The results come one day after Shopify said it was laying off about 1,000 employees, or roughly 10% of its global workforce, amid stagnating growth in e-commerce. The announcement sent Shopify’s stock tumbling, and shares closed down 14% on Tuesday.
Shopify CFO Amy Shapero said on a conference call with analysts Wednesday that, for the remainder of 2022, the company intends “to slow hiring to only the most strategic.” It will also reduce spending in “lower priority areas and non-core activities,” as well as target sales and marketing spend on “activities with shorter payback periods.”
“Shopify is committed to being operationally extremely efficient,” CEO Tobi Lutke said on the call.
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