Shopify’s stock plummeted to its lowest level in nearly two years Wednesday after the e-commerce giant warned that its revenue growth will slow this year as the world eases up on restrictions meant to quell the COVID-19 pandemic.
The Ottawa-based company's stock fell to a low of $914 on the Toronto Stock Exchange as it announced it expects revenue growth for 2022 to be lower than the 57 per cent growth it achieved in 2021. Shares were down nearly 17 per cent to $933.12 in midday trading, the lowest level since May 2020.
Chief financial officer Amy Shapero attributed the lower guidance to the health crisis along with the company's decision not to take any share of the first $1 million in revenue developers make every year on the array of booking features, subscription tools and other products they design for Shopify software.
“We believe that the COVID-triggered acceleration of e-commerce that spilled into the first half of 2021 in the form of lockdowns and government stimulus will be absent from 2022 and there is caution around inflation and consumer spend near-term,” she said in a call with analysts.
Her remarks come as the glow around Canada's tech darling has started to wane after two years of the pandemic prodding people to shop online more and encouraging businesses to roll out digital stores, delivering a wave of new sales and customers to Shopify.
Shift back to brick-and-mortar
Despite recently announcing new partnerships with platforms such as video-sharing app TikTok and Chinese e-commerce giant JD.com, Shopify has lost its title as Canada’s most valuable publicly traded company to RBC.
In recent months, people have shifted some of their purchases back to brick-and-mortar, where Shopify has less of an advantage.
The shift pushed the company, which keeps its books in U.S. dollars, to report a net loss of US$371.3 million or US$2.95 per diluted share for the quarter ended Dec. 31, weighed down by a US$509.7-million net unrealized loss on equity and other investments. The fourth-quarter result compared with net income of US$123.9 million or 99 cents per diluted share in the fourth quarter of 2020.
"The goal is to make fulfilment something that our merchants, particularly in the U.S. for now, don’t have to think about."
Those results and the move away from intense pandemic measures have also hampered Shopify's stock. Its shares have plunged after topping $2,000 late last year.
Looking forward, Shopify said it will keep trying to lure new brands with an increased focus on its fulfilment network.
The company said Wednesday it plans to invest US$1.2 billion over the next three years in new facilities across the U.S. in a bid to offer two-day delivery coverage for more than 90 per cent of the U.S. population.
Shopify opened a self-operated, leased warehouse in Atlanta last year and plans to expand that service. It is looking at how to serve larger clients through a combination of building its own warehouses and partnering with other fulfilment centres.
“The goal is to make fulfilment something that our merchants, particularly in the U.S. for now, don’t have to think about,” Shopify president Harley Finkelstein said on the same call as Shapero.
Despite the recent headwinds and lower guidance for 2022, Finkelstein remained upbeat about the company's outlook and performance.
“The evolution in commerce that fast-forwarded over the past two years offers more selling opportunities to makers, creators, influencers and curators,” he said.
“Their resilience and our drive to build them the best products for modern commerce puts Shopify and our merchants out ahead.”
He noted that Shopify ended 2021 with a merchant base that is twice as large as it was two years ago and now includes Quebec dairy producer Saputo, star football player Tom Brady's Brady Brand, German meal-kit seller HelloFresh and apparel brand French Connection.
Finkelstein also pointed out that Shopify's annual revenue in 2021 was nearly triple that of 2019 and its most recent quarter saw gains too.
Shopify's fourth-quarter revenue totalled US$1.38 billion, up more than 40 per cent from US$977.7 million a year earlier.
Focus on hiring
On an adjusted basis, Shopify earned US$1.36 per diluted share in its most recent quarter compared with an adjusted profit of US$1.58 per diluted share in the fourth quarter of 2020.
Analysts on average had expected an adjusted profit of US$1.24 per share and nearly US$1.33 billion in revenue, according to financial markets data firm Refinitiv.
The company said it also intends to focus on hiring in a competitive environment that saw its top rival Amazon.com more than double its base salary cap to $350,000 from $160,000 this month.
Shopify executives said the company will hire even more in 2022 than it did in 2021, when it brought on at least 2,021 new technical staff. The company now has a workforce of roughly 10,000, but acknowledged there are pressures in the labour market.
“There is a big talent scramble in the world,” Shopify founder Tobi Lütke said on the same call as Shapero and Finkelstein.
“There's a lot of shuffling going on, but Shopify is on the good side of the shuffling, it seems.”
– With additional reporting from OBJ staff