Shopify will cut 10 per cent of its staff after Covid-19 expansion bet fails to pay off
- Shopify was among the hottest pandemic stocks in 2020 and 2021 as online shopping boomed, but its shares have fallen 77 per cent this year
- The Ottawa-based company reported a huge profit miss in the first quarter, and analysts have cut their expectations for the second quarter results
Canadian e-commerce firm Shopify will cut about 10 per cent of its workforce Tuesday, as chief executive Tobi Lutke acknowledged the company’s decision to expand rapidly coming out of the Covid-19 pandemic did not pay off.
The move will eliminate about 1,000 jobs out of 10,000 or so total employees at Shopify. Most of the affected roles are in recruiting, support and sales, Lutke said in a memo on the company’s website.
Shopify tumbled 14 per cent to US$31.55 in New York, the biggest drop since May 5. The Wall Street Journal reported the job cuts earlier Tuesday.
“We bet that the channel mix – the share of dollars that travel through e-commerce rather than physical retail – would permanently leap ahead by five or even 10 years” because of the pandemic, Lutke wrote.
“It’s now clear that bet didn’t pay off. What we see now is the mix reverting to roughly where pre-Covid data would have suggested it should be at this point.”
Shopify was among the hottest pandemic stocks in 2020 and 2021 as online shopping boomed. It came crashing down this year, hampered by an economic slowdown and an easing of Covid-19 restrictions. Shopify shares have fallen 77 per cent this year.
The Ottawa-based company reported a huge profit miss in the first quarter, and analysts have cut their expectations for the second quarter results, which are scheduled for Wednesday before markets open.