July 25, 2021

Ecommerce is here to stay, says Shopify

(Ottawa) Shopify executives believe the migration to online sales triggered by the COVID-19 pandemic is here to stay.

Tara Deschamps
The Canadian Press

The CEO of the Ottawa company, Tobi Lutke, and its chairman, Harley Finkelstein, pointed out on Wednesday that the first models emerging from countries that no longer live in confinement, such as New Zealand and Australia, showed consumers embraced e-commerce even after COVID-19 restrictions were lifted – and they expect to see the same in North America eventually.

“Consumer preferences have changed permanently,” Finkelstein said on a conference call with analysts.

“The center of gravity was out of line. It is now live, and it is impossible to revert to the pre-pandemic version. ”

This change has been a goldmine for the e-commerce giant, which helps businesses run their online stores, and which for years had to contend with the fact that online purchases were less than 10%. retail sales.

The pandemic, with temporary store closures and the explosion of online offerings, has pushed the proportion of online sales in Canada to new records. In April 2020, it hit a record 11.4%.

Shopify was ready for this breakthrough. She has spent much of the past five years building a distribution network, signing a series of social media deals, designing new ways for entrepreneurs to access capital, and positioning themselves as a rival. from the American giant Amazon.com.

From the start of the pandemic, Shopify saw a swarm of new businesses using its software, and customers willing to shop online have yet to dissipate, the company noted when releasing its financial results for the most recent quarter. .

Profits up sharply

Shopify on Wednesday reported net income of $ 1.26 billion in the quarter, up from the net loss of $ 31.4 million in the same period last year.

Net income for the quarter ended March 31 was US $ 9.94 per share, compared to a loss of 27 US cents per share for the same period a year earlier.

Shopify attributed the growth to an unrealized gain of US $ 1.3 billion on a buy-now-pay-later-type stake in Affirm, which launched an initial public offering in January. savings, as well as sustained interest in online shopping.

Excluding one-time items, Shopify reported earnings of US 254.1 million, or US $ 2.01 per share, compared to adjusted earnings of US 22.3 million, or US 19 cents per share, one year earlier.

Analysts expected adjusted profit of 73 cents per share and revenue of 865.5 million US dollars, according to forecasts collected by financial data firm Refinitiv.

Shopify’s gross merchandise volume – the total value of orders placed through its offerings – was US $ 37.3 billion in its most recent quarter, up from US $ 17.4 billion in the same period. last year.

Its stock took $ 159.02, or 11.1%, on the Toronto Stock Exchange on Wednesday afternoon, where it closed at $ 1,589.47.

Despite everything, Shopify is far from being able to sit on its laurels.

Shopify’s outlook takes into account a return to offline transactions for some purchases and services, as vaccination will become more common in many countries in 2021 and people will have more freedom to leave their homes.

CFO Amy Shapero warned that this could weigh on Shopify’s revenue, which reached US $ 988.6 million, a 110 percent increase from US $ 470 million in the same period last year.

“We continue to expect rapid revenue growth in 2021, but at a slower pace than in 2020,” she said.

Wave of departures

The company will also face significant changes in its management team.

In mid-April, Shopify announced the departure of Director of Talent Brittany Forsyth, CTO Jean-Michel Lemieux and Chief Legal Officer Joe Frasca.

Throughout the pandemic, Shopify has also seen the departure of its director of products Craig Miller, director of product marketing Arati Sharma and Michael Perry, the director of Kit, an artificial intelligence company acquired by Shopify.

“When people leave companies, it is […] hard for everyone to figure out how to react, but I think it’s something that needs to be celebrated because clearly, amazing things have been achieved together, ”said Lutke, who has taken over from Mr. Miller in September.

For his part, he promised Wednesday that he was not about to leave the company and told analysts that he was investing “deeply” because he would “never have a better idea”.

“Leaving at the right time is what world-class leaders do,” he said. “For me, it’s still way too early. ”