Canada-based e-commerce platform Shopify posted a quarterly loss of US$1.2 billion in the second quarter. According to the company, the loss is due to the shift in customer behaviour after the pandemic. Online shopping that witnessed a boom during the coronavirus pandemic decreased after the restrictions were lifted and more customers returned to in-store shopping. The reports were released a day after Shopify CEO Tobi Lutke announced the layoff of 10 percent of the workforce – an estimated 1,000 people – in a blog post.
We have recalibrated our team to build for long-term success, and will continue to operate with rigorous discipline, investing thoughtfully into the enormous opportunity ahead of us.
Amy Shapero, chief financial officer, Shopify
The Second Quarter Loss
The Ottawa-based technology firm said the net loss for the quarter was 95 cents per diluted share, as compared to 69 cents per diluted share a year ago. The loss in the second quarter also included a $1 billion net unrealized loss on equity along with other investments while the last year included a roughly US$800 million net unrealized gain from equity and other investments in the second quarter.
Shopify’s adjusted net loss for the second quarter was US$38.5 million, or 3 cents per diluted share, as compared to the adjusted net income of $284.6 million, or 22 cents per diluted share in the 2021 second quarter.
As per Shopify, the revenue grew 16 percent year over year to $1.3 billion in the second quarter, however, it was adversely affected by the strengthening U.S. dollar relative to other currencies. Operating loss was $190.2 million, or 15 percent of revenue for the second quarter, compared with the income of $139.4 million or 12 percent of revenue for the last year.
We now expect 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.
Amy Shapero, chief financial officer, Shopify
Official Statements
Shopify chief financial officer Amy Shapero said commerce through “offline channels” grew at a fast speed in the second quarter, however, the company’s exposure there is limited but growing.
“Our merchants’ GMV [gross monthly volume] growth continued to outpace the growth of the broader U.S. online and offline retail markets as consumers shopped across more surfaces,” she said in a statement. “Our track record of prudent capital allocation toward opportunities that significantly expand the opportunity set for merchants, accelerate our product roadmap, or have strong paybacks from improved operating efficiency has served Shopify and our merchants well”.
“We continued to see increased adoption of our solutions, enabling our merchants to remain agile against a challenging macro environment and highlighting the breadth and resilience of our business model,” the Shopify CFO said. “We have recalibrated our team to build for long-term success, and will continue to operate with rigorous discipline, investing thoughtfully into the enormous opportunity ahead of us.”
Building companies comes with high highs and low lows. Today I had to share some sad news with Shopify. https://t.co/gNO37lWYpg
— tobi lutke (@tobi) July 26, 2022
Steps To Counter-Balance
The company launched several new products including Shopify Editions, a summary of 100-plus new capabilities spanning B2B, Shopify Audiences and Shopify Markets, POS Pro in the second quarter. It even closed the acquisition of Deliverr, worth $2.1 billion acquisition, a technology-focused last-mile logistics company. However, Shapero said that Deliverr acquisition didn’t impact the results of the second quarter, which didn’t close until July 8.
Shopify also entered into a partnership with YouTube in the quarter, to enable online merchants integrate online stores with videos and livestreams. However, these steps didn’t do much to lift the e-commerce market.
Future Plan Of Action
Shapero said Shopify expects to reduce its expenditure for the rest of the year and prioritise sales and marketing initiatives on activities that have shorter payback periods.
“We now expect 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,” said the company in the outlook for the remainder of 2022.
Shapero added that Shopify expects an adjusted operating loss through the remainder of the year and its “third-quarter adjusted operating loss, excluding severance costs, is expected to materially increase over the second quarter, reflecting time needed for the streamlining of our operations to take effect, the implementation of our new compensation framework, the first quarter of Deliverr operations, including approximately 450 team members, and related integration costs, and up to an estimated $50 million for certain other operating items associated with these and other areas.”
According to Shapero, fourth-quarter adjusted operating loss is expected, however, it can be smaller than Q3 but still bigger than Q2.
