Top Line
Shopify shares fell by their biggest ever in midday trading on Wednesday after the e-commerce giant reported an unexpected first-quarter loss and warned that its current quarter's revenue growth could shrink due to the sale of its logistics business last year, reducing billionaire CEO Tobias Lutke's net worth by more than $1 billion.
Brazil – 2022/04/22: In this photo illustration, a silhouette of a woman holds a smartphone, … [+]
Key Facts
Shopify's shares fell 20% to $61.99 just after 1:30 p.m. on Wednesday, putting the company on track to post its biggest one-day loss since going public in 2015.
The stock fell 21.3% to a low of $60.64 during intraday trading before recovering somewhat.
The Canada-based e-commerce company struggled to cut expenses and reported a net loss of $273 million in the first quarter, even as its revenue rose 23 percent year-over-year to $1.9 billion, beating expectations.
And that's not all: Shopify said it expects the sale of its logistics division to Flexport last year to create a “revenue growth headwind” of 3% to 4%, and that it expects its second-quarter revenue growth to decline “by a low-to-mid teens percentage point rate,” after previously reporting “low to mid-20s” growth.
But the company said the sale would provide a “tailwind” to boost second-quarter gross profit by 2-3 percent compared with the same period last year, although it expects its gross profit percentage to decline quarterly in the three months to June.
Shopify President Harley Finkelstein said the losses were due to expenses such as new marketing initiatives, but that the company is open to taking advantage of opportunities to “focus” on areas of its business that could lead to “significant growth,” according to Barron's.
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Forbes Rating
Lutke is the company's co-founder and CEO, and Forbes estimates his net worth at $5.7 billion, though the stock price decline reduced that figure by about $1.2 billion on the day.
Main Background
Shopify calls itself “a complete commerce platform that anyone can use to start, manage and grow a business,” and focuses on centralizing companies' e-commerce needs by consolidating payment processing, inventory statistics, shipping tools and more on a single platform. Shopify's share price decline followed a 0.4% drop on Tuesday, valuing the company at its lowest since November 2023. The loss erased gains recorded during a four-day winning streak that began on May 1, a year after the company sold its former logistics business to Flexport. Shopify's second-quarter outlook comes as the company faces increased competition in the global e-commerce industry and struggles to overcome challenges caused by a slowdown in consumer spending after the pandemic-induced rush to online shopping.
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