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Shopify’s Quarterly Results Fall Below Expectation, Issues Weak Guidance For Next Quarter

Ibhadojemu Emmanuel by Ibhadojemu Emmanuel
July 27, 2022
in Uncategorised
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E-commerce company Shopify reported weaker than expected quarterly earnings results for the second quarter of 2022. The company warned that its business was susceptible to inflation and rising interest adding that this would take a hit on the company in the second half of the year.

For the second quarter, Shopify reported a loss of 3 cents per share, adjusted, compared to a profit of 2 cents per share that analysts had expected for the quarter, according to Refinitiv.

Second quarter revenue came in at $1.3 billion falling slightly below analysts’ forecast of $1.33 billion, according to Refinitiv. The company saw its shares go up about 7 percent in afternoon trading following a rally in tech stocks.

The company experienced new highs during the pandemic period. The company helps businesses set up an online store and during the pandemic, there was an increase in patronage of online stores as physical stores were forced to close up. Many retailers were able to establish a presence on the platform which in turn meant the same for Shopify. Shopify recorded double-digit revenue growth throughout much of 2020 and 2021 which saw the effects of the pandemic rage the most.

Commenting on the company, Tom Forte, an analyst at D.A. Davidson said that the company’s layoff announcement which came on Tuesday, and its subsequent stock fall seems to have “de-risked” the company’s shares on Wednesday. Shopify laid off about a thousand or 10 percent of its global workforce.

Executives’ talks have surrounded plans to reduce spending while continuing to be a leader in the e-commerce space. This must have helped to keep investors calm, Tom Forte said.

Following its results, the company now expects that 2022 “will end up being different, more of a transition year, in which e-commerce has largely reset to the pre-Covid trend line and is now pressured by persistently high inflation.”

Shopify also said it expects to generate an adjusted operating loss for the second half of 2022. While the company’s CFO Amy Shapero was speaking on a conference call with analysts, she noted that for the rest of the year, the company plans “to slow hiring to only the most strategic,” adding that Shopify will also reduce spending in “lower priority areas and non-core activities,” as well as target sales and marketing spend on “activities with shorter payback periods.”

“Shopify is committed to being operationally extremely efficient,” CEO Tobi Lutke added.

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Ibhadojemu Emmanuel

Ibhadojemu Emmanuel

Ibhadojemu Lucky Emmanuel is a graduate of Education and Economics from the University of Benin. He has a passion for tech and business and has been writing professionally for over a period of five years. He's written across various topics and segments and knew tech-business was it when he first stumbled on it. He has a great passion for music and arts, and wants to visit as many countries as he can someday.

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