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Earnings Results: Shopify stock sinks toward worst day on record after earnings


Shares of Shopify Inc. were tumbling toward their worst day on record Wednesday, after the e-commerce company beat expectations with its most recent results but signaled that its growth could slow as some pandemic-era benefits subside.

While Shopify Chief Financial Officer Amy Shapero believes that the pandemic helped drive important behavioral changes around e-commerce, she also expects “a more measured macro environment relative to 2021.” Shapero forecasts that Shopify

will still see “rapid” growth in 2022, but at lower rates than in 2021.

“While 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’s caution around inflation and consumer spend near term, for the full year we see economic growth supporting the continued penetration of retail by e-commerce,” she said on the company’s earnings call Wednesday morning.

Shares were off 18.1% in midday trading and on track to log their largest single-day percentage decline on record, according to Dow Jones Market Data. Shopify’s stock has declined 56.5% over the past three months as the S&P 500

has lost 5.6%.

Shopify also indicated that it plans to invest more heavily in fulfillment as efforts there move to a “build” phase from a “prototype” phase, according to Shapero. The company aims to simplify the fulfillment experience for merchants and has conducted a pilot with a self-operated warehouse in Atlanta.

An expanded fulfillment network promises more opportunities for perks like one-day and two-day shipping, but it also requires investment dollars. Shopify expects that spending on fulfillment “will start to ramp in 2022” and it also now anticipates that it will see about $1 billion in capital expenditures across 2023 and 2024 related to warehouse hubs.

The company faced several questions on the earnings call about its fulfillment plans, including on the company’s decision to operate more of its fulfillment centers itself.

“It’s not as if this will be entirely Shopify-owned, but we want to match Shopify warehouses with partner warehouses, and we expect that quality will increase and the capacity will increase because of this change,” President Harley Finkelstein said on the earnings call.

For the most recent quarter, Shopify grew revenue to $1.38 billion from $978 million a year earlier, while analysts surveyed by FactSet were expecting $1.34 billion.

The company logged a fourth-quarter net loss of $371.3 million, or $2.95 a share, versus net income of $123.9 million, or 99 cents a share, in the year-prior quarter. Shopify’s net-loss figure in the latest quarter reflects a $509.7 million net unrealized loss on investments.

Shopify topped consensus expectations on adjusted earnings per share for the fourth quarter, coming in at $1.36, whereas analysts had been looking for $1.30. The company generated $1.58 in adjusted EPS a year ago.

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