Salem Radio Network News Tuesday, August 16, 2022

Business

Shopify vows ‘rigorous review’ after surprise loss on easing online growth

By Tiyashi Datta and Nivedita Balu

(Reuters) – Canada’s Shopify Inc said on Wednesday it plans to scale back headcount and spending after a surprise quarterly loss as cost-conscious consumers cut back on online purchases, sending its battered shares 5% higher.

The company on Tuesday cut 10% of its workforce while Chief Executive Tobi Lutke acknowledged bets that a shift to online shopping would abide after the pandemic did not pay off.

The promise to rein in costs come as Shopify forecast adjusted operating losses for the second half of the year, expecting it to narrow in the all-important holiday sales quarter.

“We overshot that (retail spending on ecommerce) prediction and we are recalibrating,” President Harley Finkelstein said in an interview. “We are conducting far more rigorous review of our operations and our teams.”

After recording sky-rocketing growth during the pandemic, Shopify invested heavily to build its business and fulfillment network, including a $2 billion purchase of Deliverr, to help merchants deliver goods on time.

That came just as inflation raced to decades high and online shopping growth slowed down with more shoppers returning to brick-and-mortar stores for essential purchases.

“They did a good job on their conference call laying out their plans for the future… I think the market is beginning to recognize… that their reported and future growth is still much higher than the market,” said Richard Tse, an analyst with National Bank Financial.

Shopify still expects its gross merchandise volume (GMV) growth to outperform the broader retail market.

On an adjusted basis, Shopify reported a loss of 3 cents per share for the second quarter, while analysts on average had expected a profit of 2 cents.

However, revenue rose 16% to $1.3 billion, in line with estimate of $1.33 billion, according to Refinitiv IBES data.

GRAPHIC: Shopify’s revenue growth since its IPO (https://graphics.reuters.com/SHOPIFY-RESULTS/byvrjwdgjve/chart.png)

(Reporting by Tiyashi Datta and Nivedita Balu in Bengaluru; Editing by Sriraj Kalluvila)

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