Revenue for the three months ended June 30 increased 16% to $1.3 billion from $1.12 billion in the second quarter last year. (Photo: 123RF)
Shopify’s president says the company is in an “enviable” position, although it continues to express regret for misjudging the growth of the e-commerce market, a move that forced it to announce a significant number of layoffs on Tuesday.
Harley Finkelstein detailed on Wednesday how an Ottawa-based software company was held accountable after predicting that the number of purchases people made online rather than in physical stores would permanently jump five or ten years from with what it was before the pandemic and after hiring to meet those needs. expectations.
“At the time, we couldn’t know for sure, but we knew that if this prediction came true, we would have to quickly scale the business to fit this future,” he explained during a conference call with analysts.
“And here we are when things happened differently.”
Shopify has found that the level of spending its merchants see online is higher than in 2018, before COVID-19 hit the world, but lower than the company expected, resulting in a $1 loss, among other things. $2 billion for the last completed quarter.
“In short, we have gone too far with our forecast,” admitted Mr. Finkelstein.
“As we review our investments and spending, we are careful not to sacrifice components we believe are essential for Shopify.”
His remarks came the day after Shopify announced it was laying off 10% of its staff — or about 1,000 employees, considering the company had a staff of 10,000 in 2021.
The layoffs, for which CEO and founder Toby Lütke claimed responsibility, were blamed for Shopify’s miscalculation and heavily impacted an already low stock price. It fell 14% during Tuesday’s session.
Within months of a wide-ranging divestiture in the technology sector of the stock markets, Shopify’s stock price has fallen more than 78% since hitting a high of $222.87 at the end of 2021.
Shares closed Wednesday at $45.17, up $4.48, or 11%, on the Toronto Stock Exchange.
But Shopify is confident it can turn the tide, despite the company’s CFO reminding on a profit and loss conference call that inflation is at its highest level in nearly 40 years and shopping habits have changed.
Consumers are now turning to discounters and cutting spending in many categories, Shapero said, and that trend is expected to continue through 2022.
“Our teams are aware of the macroeconomic environment and have carefully assessed and adjusted their spending priorities,” she continued.
Natural labor force
This process began with a workforce review that slowed down Shopify Q1-Q2 hiring, identifying areas where Shopify could “improve”. [?ses] activities and [son] team” and thus move on to layoffs.
The company will continue to reduce recruitment in 2022 and end the year with a “modest” workforce, Ms Shapero said.
It’s hard to tell what a company’s natural headcount should be, Lutke says, but Shopify isn’t interested in linear headcount growth.
He acknowledged that the layoffs taught him why many business leaders are wary of making big bets like the ones Shopify has relied on in their business.
Shopify said it lost $1.2 billion, or 95 cents per share, in its most recent quarter, compared to a profit of $879.1 million, or 69 cents per share, in the same period last year.
The loss for the most recent quarter included an unrealized loss of $1 billion from equity and other investments, while the second quarter 2021 result included an unrealized gain of approximately $800 million from equity and other investments.
Excluding one-off items, Shopify posted a loss of $38.5 million, or 3 cents per share, in the most recent quarter, compared to a profit of $284.6 million, or 22 cents per share, a year earlier.
Revenue for the three months ended June 30 increased 16% to $1.3 billion from $1.12 billion in the second quarter last year.
The company forecasts that its third-quarter adjusted operating loss, excluding severance pay, is likely to increase from the second quarter, with Shopify posting a loss in the fourth quarter.
“Shopify has been overly aggressive in growing its operating expenses due to COVID-19, and the post-COVID-19 e-commerce environment adjustment is proving to be turbulent and disruptive,” he, Martin Toner, analyst at ATB Capital Markets, said in a note to investors. .