Tuesday, August 16, 2022
Home Feature news Shopify sees 'transition' year after posting second-quarter loss

Shopify sees ‘transition’ year after posting second-quarter loss

Says it will post losses for the rest of the year

Article content

Canadian e-commerce giant Shopify Inc. posted an adjusted operating loss of three cents per share for its fiscal second quarter and warned it would report more losses for the remainder of the year in part due to costs related to the integration of fulfilment provider Deliverr, which it acquired for US$2.1 billion earlier this month.

Advertisement 2

Story continues below

Article content

“We now expect 2022 will end up being different, more of a transition year, in which e-commerce has largely reset to the pre-COVID trend line and is now pressured by persistent high inflation,” the company said ahead of its earnings call Wednesday.

The company expects the third-quarter adjusted operating loss to “materially” increase over the second quarter as it implements changes to its compensation network and begins Deliverr operations, but that expense growth will decelerate into the fourth quarter.

The earnings release followed CEO Tobi Lütke’s announcement on Tuesday that the company was laying off 10 per cent of staff, or 1,000 workers, as a result of a failed bet that pandemic era e-commerce growth would continue.

Advertisement 3

Story continues below

Article content

Executives said they the company had made a decision to expand to match what they expected would be a five or 10-year leap ahead in e-commerce growth. Instead, consumers are now returning to physical retail stores, reverting to previous shopping trends.

Commerce through offline channels grew faster in the second quarter, despite the company’s focus on online, Shopify’s CFO Amy Shapero said.

“The company wants to be highly effective. The company is not interested in having linear growth of headcount,” Lutke said during the earnings call, adding that the company plans to automate some operations following the job cuts.

Company president Harley Finkelstein said some of these automation plans are already underway, citing the introduced localized subscription pricing, which makes it easier to sign up for the service, as well as adding point-of-sale and Shopify Payments in some countries.

Advertisement 4

Story continues below

Article content

They attributed an 11 per cent annual increase in gross merchandise volume (GMV) to these solutions, saying the growth benefited from strong performance by merchants who adopted the products. While the GMV grew to US$46.9 billion during the quarter, it missed analysts estimates of US$48.6 billion.

  1. ‘We have to adjust’: Shopify lays off 10% of workforce as pandemic e-commerce surge proves fleeting

  2. The Shopify Inc. headquarters in Ottawa.

    Shopify shares fall 6% after 10-for-1 stock split finalized

  3. Shopify's Twitter partnership will prominently display products on merchant profiles, making it easier to facilitate sales through social media.

    ‘A really big deal’: Shopify launches Twitter partnership, tap-to-pay offering

  4. Tobi Lütke, founder and chief executive of Shopify.

    Most Shopify investors opposed CEO Lütke’s founder share power gain, Glass Lewis says

While total revenue grew 16 per cent on a year over year basis to US$1.3 billion, the Ottawa-based company said the amount would have been 1.5 percentage points higher were it not for the significant strengthening of the U.S. dollar relative to foreign currencies in the quarter.

Advertisement 5

Story continues below

Article content

After plunging by nearly 15 per cent on Tuesday, Shopify shares rebounded following the earnings report. The shares were trading up more than 11 per cent at US$35.24 in New York on Wednesday afternoon.

In a note to clients, analysts with the National Bank of Canada said that while the results were below consensus expectations, when put “into perspective, they were reasonable, particularly given the current backdrop.”

The three cent loss came after adjusted net income in the year-ago quarter was $284.6 million, or $0.225 per diluted share.

On an unadjusted basis, the company saw an operating loss of $1.2 billion, or $0.95 per share, down from a gain of $0.9 billion, or $0.695 per diluted share in the year ago quarter. The loss included a net unrealized loss on equity and other investments of $1 billion.

• Email: dpaglinawan@postmedia.com | Twitter:


Story continues below


Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.

- Advertisment -

Most Popular

Inflation chipping away at your back-to-school budget? Here’s how to save

Balancing the budget for back-to-school shopping is more difficult for parents this year as rampant inflation threatens piggy banks nationwide. More than a third of...

Granny does Q&A from beyond the grave after AI was trained to answer for her

Marina Smith MBE, who died in June aged 87, speaks to mourners at her own funeral (Credit: Storyfile)A woman who died in June has...

How to get the Android 13 update on your Pixel right away

Google announced on August 15th, 2022, that it would begin rolling out the Android 13 update to its portfolio of Pixel devices. As is...

Windows 11’s next big update arrives next month with Start menu folders, new gestures, and more

Microsoft is planning to release its next big Windows 11 update, version 22H2, on September 20th. Sources familiar with Microsoft’s plans tell The Verge...