Shopify weathering softening consumer spending with diversity of merchants: president

A sign is seen outside the Shopify headquarters in Ottawa, Tuesday September 1, 2020. THE CANADIAN PRESS/Adrian Wyld

Shopify Inc.'s president has heard retailers talking about softening consumer spending but feels his company is weathering the storm well because of the diversity of its merchants.

"Our merchants do seem to be outperforming and doing better than others," Harley Finkelstein told analysts on a Wednesday earnings call.

"I think a big part of the reason that we are not seeing the same thing that others might is because we simply have merchants across a ton of verticals and across a ton of geographies."

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The Ottawa-based e-commerce software company caters to both small businesses and multi-national giants. It's recently attracted the likes of burgeoning brands including jeweler Mejuri and apparel company Evereve, along with household names such as Toys "R" Us, Barnes & Noble and Casper.

The bevy of brands have helped Shopify cope with lower consumer spending caused by high inflation and elevated borrowing rates in many of its key markets.

Several brands have said they expect the softening to continue as the year progresses, but Shopify's chief financial officer Jeff Hoffmeister said on the same call as Finkelstein that their company hasn't seen "any significant deterioration or improvement" during its second quarter.

That quarter delivered a net income of US$171 million or 13 cents US per diluted share, Shopify said Wednesday.

The result for the company, which keeps its books in U.S. dollars, compared with a net loss of US$1.31 billion or US$1.02 per diluted share a year earlier when the company recorded a US$1.34-billion charge on the sale of its logistics business.

Revenue for the quarter ended June 30 totalled US$2.05 billion, up from US$1.69 billion in the same quarter last year.

The increase came as subscription solutions revenue reached US$563 million, up from US$444 million a year ago, while merchant solutions revenue amounted to US$1.48 billion, up from US$1.25 billion.

"We are at our strongest yet," Finkelstein told analysts just after the results were released.

As he spoke, the company's shares on the Toronto Stock Exchange soared almost 24 per cent, or $17.59, to $92.15.

Meanwhile, TD Securities analyst Daniel Chan saw the quarter as being a reflection of "Shopify's e-commerce leadership and continued ability to gain market share," especially because its results were strong "despite a mixed consumer spend environment," he said in a note to clients.

He added that parts of the company's guidance were "better than expected."

In its outlook for its third quarter, Shopify said it expects revenue to grow at a low-to-mid-twenties percentage rate on a year-over-year basis.

During that quarter, Hoffmeister said the company plans to hire for some key roles in its sales and research and development divisions. He expects the year to end with "minimal" headcount growth. He said Shopify had 8,300 employees at the end of 2023.

Shopify laid off 20 per cent of its staff in May 2023 in a move meant to help it more intensely focus on its main operations. In July 2022, it also cut about 1,000 workers.

This report by The Canadian Press was first published Aug. 7, 2024.