Shopify shares fell on Wednesday after the company reported a loss in its latest quarter and predicted slower sales growth in the coming quarter in its financial outlook.E-commerce software company with bookkeeping in the United States
Shopify shares fell on Wednesday after the company reported a loss in its latest quarter and predicted slower sales growth in the coming quarter in its financial outlook.
The e-commerce software company, which maintains its books in U.S. dollars, announced a net loss of $273 million, or 21 cents per diluted share, for the quarter ended March 31.
This compares to year-ago earnings of US$68 million, or 5 cents per diluted share.
Revenue for the quarter totaled US$1.86 billion, an increase of 23% from US$1.51 billion in the first quarter of last year.
Following the results, Shopify's stock price fell $20.41, or 19.3%, to $85.34 in midday trading Wednesday.
However, the company's forecast is that sales growth is expected to slow to “low teens” in the next quarter.
The outlook was driven by the sale of Shopify's logistics business, which was announced last May when the company also said it would cut its workforce by about 20 percent. In this outlook, sales growth in the second quarter is expected to decline by 3-4% over the same period last year.
Shopify also expects its gross margin to decrease by 0.5 percentage points from the first quarter.
Chief Financial Officer Jeff Hoffmeister told analysts on a conference call Wednesday that challenges to the outlook include a stronger dollar and “some softening in consumer spending in Europe.”
“We're seeing an economic slowdown in Europe, particularly in the UK,” he said, noting that Shopify has been “very strong” in this market recently.
Hoffmeister also emphasized that the benefit from price changes is expected to be smaller in the second quarter compared to the first three months of this year.
“We remain adamantly confident in our superior products and go-to-market efforts that will drive our continued growth and our ability to further strengthen our position as a leader in unified commerce.” said.
“We expect our strong momentum to continue in the second quarter.”
The company announced that Merchant Solutions revenue reached US$1.35 billion in the latest quarter, up from US$1.13 billion in the year-ago quarter, primarily due to “the benefit of the absence of logistics.” It is said that
Meanwhile, subscription solutions revenue totaled US$511 million, up from US$382 million in the prior year period.
On an adjusted basis, Shopify announced it earned 20 cents per diluted share in its latest quarter, up from adjusted earnings of 1 penny per share in the first quarter of 2023.
That compares with analysts' expectations of 17 cents per diluted share, according to LSEG Data & Analytics.
Shopify has kept its headcount flat for the third straight quarter after cutting jobs last year, President Harley Finkelstein said.
He said he believes automation will allow Shopify to “achieve a continued combination of consistent sales growth and profitability” while reducing headcount growth.
“Over the past 18 months, we have put a lot of effort into building an efficient infrastructure and systems that will help us streamline our work and maintain fast product releases.” says Finkelstein.
“Essentially, these systems and infrastructure act as catalysts, allowing us to operate with greater efficiency and speed.”
Hoffmeister pointed to the increasing use of artificial intelligence to support merchants. He said more than half of Shopify's merchant support interactions in the first quarter were aided by AI, and “in many cases were completely resolved with the help of AI.”
AI also enables 24/7 live support in eight languages, which was previously only available at certain times of the day.
“We have significantly enhanced the seller experience,” he said.
“Average support response times have decreased, and the introduction of AI has alleviated some sellers' previous reluctance to ask trivial or naive questions. ”
This report by The Canadian Press was first published May 8, 2024.
Companies featured in this article: (TSX:SHOP)
Sammy Hughes, Canadian Press
