- Shopify shares sank 17% on Tuesday as the company announced layoffs at the e-commerce platform.
- The pandemic fueled growth in the e-commerce space, and the company anticipated such strength to continue.
- “Ultimately, placing this bet was my call to make and I got this wrong,” Shopify CEO Tobi Lütke wrote in a blog post.
Shopify shares sharply dropped Tuesday as the e-commerce support platform said it will lay off 10% of its workforce due to its soured bet that broader online shopping trends would keep booming as they did at the height of the COVID pandemic.
The move will affect about 1,000 workers, according to The Wall Street Journal which had earlier reported on the pending layoffs.
The stock fell as much as 17% to $30.55, the weakest price since July 15. Shares of the Canada-based company during 2022 have lost more than 75% of their value. By comparison, the tech-focused Nasdaq Composite this year has lost roughly 26% this year.
Shopify’s 10% payroll cut, which was confirmed in a corporate blog post, will include jobs in recruiting, support, and sales, among others.
“Before the pandemic, ecommerce growth had been steady and predictable. Was this surge to be a temporary effect or a new normal?,” Shopify CEO Tobi Lütke wrote to employees in the post.
He said the company had bet that the channel mix – or the share of dollars that travel through e-commerce rather than physical retail – “would permanently leap ahead by 5 or even 10 years,” prompting expansion of the company which sells tools that help companies run their e-commerce websites.
“It’s now clear that bet didn’t pay off,” wrote Lütke. Shopify was still growing steadily “but it wasn’t a meaningful 5-year leap ahead.”
“Ultimately, placing this bet was my call to make and I got this wrong,” he added. “As a consequence, we have to say goodbye to some of you today and I’m deeply sorry for that.”
Shopify saw a boom in business in 2020, when the COVID-19 was declared a pandemic, and reported 57% revenue growth for 2021. But its stock has been coming down since hitting an all-time high above $176 in November 2021.
Shopify’s layoffs arrive at a time that investors have been selling off equities in anticipation that the US economy and the economies worldwide will run into recessions following periods of recovery after the end of mass lockdowns. US consumers have broadly shifted spending to services from household items after widespread COVID restrictions were lifted.
Hot inflation has also prompted consumers to spend more on necessities and cut back on consumer discretionary items, with such a warning coming from Walmart late Monday in cutting its fiscal 2023 profit outlook.